Understanding Business Cycles and Maturation Periods

Business Cycles

Long Cycle

The long cycle begins with fundraising and the immobilization of capital in fixed assets. The annual amortization cost is incorporated into the product, which allows for the recovery of a portion of the annual investment. When assets are fully depreciated, the depreciation funds are used to renew them, leading to another cycle. The company recovers the money that was immobilized through depreciation.

Scheme:
+ Own resources / Outside resources → Money → Investment → Depreciation → Money

Short Cycle

Also called the cycle of operation, the business cycle, or the money-goods-money cycle. It starts with the immobilization of resources in the acquisition of raw materials, continues with production, marketing, and the sale of products, and ends with the collection of invoices from customers.

Cycle: Money → Shopping → Production → Sales → (Repeat)

Average Maturation Period

This represents the time it takes to recover the money the company has invested in the production process; specifically, the number of days an item typically circulates to complete one full cycle of exploitation.

Subperiods of the Average Maturation Period

• Average Provisioning Period (WFP): The time raw materials spend in the warehouse waiting to be used.
• Average Production Period (PFP): The number of days required to produce the goods.
• Average Sales Period (PVP): The number of days it takes to sell products once manufactured.
• Average Collection Period (PMC): The number of days it takes to collect invoices from customers.
• Average Payment Period (PMP): The number of days it takes to pay invoices to suppliers.

Calculation of the Average Maturation Period

Formulas:

• Economic Maturation Period: The total time of the entire cycle of exploitation, from the entry of materials into the warehouse until the collection of bills and invoices from customers.
• Financial Maturation Period: The time the company takes to recover the money invested in the purchase of materials for production. This represents the number of days the company is self-financed.

Maturation Period of a Commercial Enterprise

• Supply or Storage Subperiod (WFP): Time elapsed until the product is sold.
• Collection Subperiod (PMC): Time taken to collect letters or invoices from customers.
• Payment Subperiod (PMP): Time taken to pay suppliers.