Updated for 2026 Syllabus Detailed Explanations High-Yield Core Concepts

Bank Promotion Exam Guide

Banking Awareness | Banking Knowledge | for all Bank Exams

Home » SBI CBO BANKING KNOWLEDGE –… » General Practice
Module: General Practice

Q111: Regarding the "Operating Cycle" in working capital assessment, which of the following statements is NOT correct?

A
It is the time duration required to convert raw materials into finished goods and then into cash.
B
A longer operating cycle generally indicates a requirement for a higher level of working capital.
C
The operating cycle includes the time funds are tied up in Raw Materials, Work-in-Progress, Finished Goods, and Receivables.
D
A negative operating cycle implies that the company pays its suppliers much faster than it collects from its customers.
✅ Correct Answer: D
The Operating Cycle (Working Capital Cycle) is the time taken to convert "Cash to Cash" (Cash -> Raw Material -> Work in Progress -> Finished Goods -> Sales/Receivables -> Cash). Why Option D is Incorrect: A Negative Operating Cycle implies that the company collects money from customers before it has to pay its suppliers (common in supermarkets like Amazon or Walmart). This means the "Payables Period" (credit from suppliers) is longer than the time it takes to sell goods and collect cash.
It indicates high efficiency and reduces the need for bank finance.
Option D states the opposite (paying suppliers faster), which would result in a positive and long cash conversion cycle.
← Previous (Q110) In the context of banking credit facilities, ... Next (Q112) → The "Turnover Method" (Nayak Committee) and "... 📚 Back to General Practice

🔄 More from General Practice: