Category Archives: PLANNING OF WORKING CAPITAL

MANAGEMENT OF WORKING CAPITAL IN INDIA

MANAGEMENT OF WORKING CAPITAL IN INDIA MANAGEMENT OF WORKING CAPITAL IN INDIA   Finance-Assignments.comInstructions Feel free to send us an inquiry, we reply back real quick. Or directly email us at order@finance-assignments.comName *Email *Phone *Requirements/ Instructions File Upload File Upload File Upload  VerificationPlease enter any two digits *Example: 12This box is for spam protection - pl

Cash and Bank Balances

Cash and Bank Balances Apart from WC needs for financing inventories and debtors, firms also find it useful to have some minimum cash balances with them. It is difficult to lay down the exact procedure of determining such an amount. This would primarily is based on the motives for holding cash balances of the business firm. attitude of management toward risk the access to the borrowing sources in times of need

COMPUTATION OF WORKING CAPITAL

COMPUTATION OF WORKING CAPITAL The two components of working capital (WC) are current assets (CA) and current liabilities. They have a bearing on the cash operating cycle. In order to calculate the working capital what is required is the holding period of various types of inventories, the credit collection period the credit payment period. Working capital also depends on the budgeted level of activity in terms 

Operating Efficiency

Operating Efficiency The operating efficiency of the magnificence is above an important determinant of the level of working capital. The management can contribute to a sound working capital position through operating efficiency. Although the management cannot control the rise in prices, it can ensure the efficient utilization of resources by eliminating waste, improving coordination, and a fuller utilization 

Price Level Changes

Price Level Changes Changes in the price level also affect the requirements of working capital. Rising prices the use of more funds for maintaining an existing level or activity. For the same level of current assets, higher cash outlays are required. The effect of rising prices is that a higher amount of working capital is needed. However, in the case of companies which can raise their prices proportionately,

Depreciation Policy

Depreciation Policy Depreciation policy also exerts an influence on the quantum of working capital. Depreciation charges do not involve any cash outflows, The effect of depreciation policy on working capital is, therefore, indirect. In the first place, depreciation effects the tax liability and retention of profits. Depreciation is allowable expenditure in calculating net profits, enhanced rates of depreciation

Dividend Policy

Dividend Policy Another appropriation of profits which has a hearing on working capital is dividend payment. The payment of dividend consumes cash resources and, thereby, affects working capital to that extent. Conversely, if the firm does not pay dividend the retains the profits, working capital increases. In planning working capital requirements, therefore, a basic question to be decided is whether profits wi

Profit Level

Profit Level The level of profits earned differ from enterprise to enterprise. In general, the nature of the product, hold on the market, quality of management and monopoly power would by and large determine the profit earned by a firm. A priority, it can be generalized that a firm dealing in a high quality product, having a good marketing arrangement and enjoying monopoly power in the market, is likely to earn

Vagaries in the Availability of Raw Material

Vagaries in the Availability of Raw Material The availability or otherwise of certain raw materials on a continuous basis without interruption would sometimes affect the requirement of working capital. There may be some materials which cannot be procured easily either because of their sources are few or they are irregular. To sustain smooth production, therefore, the firm might be compelled to purchase and stock

Growth and Expansion

Growth and Expansion As a company grows, it is logical to expect that a larger amount of working capital is required. It is, of course, difficult to determine precisely the relationship between the growth on the volume of business of a company's and the increase in its working capital. The composition of working capital in a growing company also shifts with economic circumstances and corporate practices. Other