What is the first stage of the cash flow cycle?

The first stage of the cash flow cycle is the acquisition of raw materials. This stage is critical because it marks the beginning of the process where a business invests in the foundational resources required for production. Without obtaining raw materials, which includes everything from the physical inputs needed for manufacturing to the resources required for services, a company cannot initiate its operations or create products.

In the context of the cash flow cycle, after raw materials are acquired, businesses typically engage in manufacturing, after which they may store products and eventually pay suppliers. Thus, acquiring raw materials initiates the cash flow cycle, starting a sequence of financial transactions that are essential for the business's operational flow.