Question

"Short-Term Finance and Planning."

Imagine that you have a choice between a business firm with short-term operating cycle and a firm with long-term operating cycle. Determine two (2) advantages and two (2) disadvantages of each. Select the operating cycle (short-term or long-term) that you prefer and justify your answer with an explanation.

Answer 1

Two advantages of short term operating cycle-

A. the company will be having a higher amount of liquidity if it has a short term operating cycle.

B. The company will be having a higher flexibility in its ends in order to delay its payments to creditors.

Two disadvantages of of short-term operating cycle are as follows-

A. The company will have to offer a lot of discount schemes in order to have cash quickly.

B. the company generally do not have higher inventory in it's hands in order to deal with higher order capacity.

Two advantages of of long-term operating cycle will be that the firm will be having a higher inventory in its hands and the firm will also be having a better capital allocation so it will have lesser cash in its hands

two disadvantages of long-term operating cycle will be that the company does not have enough liquidity in its hands and the company will also not have much flexibility and regulating capacity in its supply chain.

I will be generally Preferring short term operating cycle as it will be helping in having a flexibility and it will also help in having a control over my supply chain and it will help in ensuring quickerlr payments of debt.