Spinning Mill Working Capital Cycle

How to read this sheet

Every component is a holding period turned into money at a daily run rate, and the run rate divides by 365 rather than by working days because holding periods are elapsed calendar time: cotton sits in the godown on the days the mill is shut, and a buyer's sixty days run over weekends. Work in process is valued at full raw material plus half the conversion, which is the standard convention and an average across a pipeline that runs from an untouched lap to finished yarn on the winder; a mill with unusually long work in process and expensive conversion should look at that assumption before relying on the total. Finished goods are held at cost rather than at selling price, because valuing them at price would have the mill funding its own unrealised profit, which no lender permits. Receivable days blend by value and not by tonnage - a fine count is a small share of the weight and a large share of the money - so the blended figure will sit above the tonnage-weighted average whenever the finer counts are the ones sold on longer credit. Supplier credit is netted at the raw material run rate, and it is the most fragile line in the cycle: it is a commercial courtesy rather than a facility, it disappears in a tight cotton season exactly when stock days are longest, and a mill that has planned around it should test the cycle with this field at zero. The bank limit reported here is the requirement, not the sanction: an actual limit is assessed by the lender on their own norms, is drawn against stock and receivable statements, and will be capped by drawing power that falls when inventory falls - so a mill can hold a sanctioned limit it cannot draw. Interest is charged on the full limit for the whole year, which overstates the cost for a mill whose drawings swing seasonally and understates it for one permanently at the limit. Nothing here funds capital expenditure, and the cycle assumes the mill is running at the production shown: a project ramping up funds a smaller cycle and should be run again at each stage of the ramp rather than at the rated figure.