Reorder Point or Reorder Level

The reorder point or reorder level is a stock balance when a new purchase order should be issued to replenish inventory stock. In other words, it is the amount of inventory to be used during… Read more

Economic order quantity, EOQ

Definition Economic order quantity or EOQ model is the equation that helps compute order quantity of inventory accompanied by the minimum total holding and ordering costs. Formula The economic order quantity is derived from the… Read more

Operating Cycle

Definition An operating cycle is the period of time from the moment raw materials are purchased to when cash is received from customers. This financial ratio measures the performance of working capital management. An increase… Read more

Working Capital Financing Strategies

Definition Three basic strategies are used in financing working capital. They differ in the proportion of long-term and short-term financing used as a source for permanent and temporary working capital. Moreover, these three approaches have… Read more

Working Capital

Definition Working capital is a financial concept describing the difference between current assets and current liabilities of a business. If current liabilities are greater than current assets, a business has a deficit of working capital,… Read more