Capital Budgeting LET US SUM UP - Accounts and Finance for Managers

The "working capital" means the funds available for day today operations of the enterprise. It also represents the excess of current assets over the current liabilities which include the short term loans". The working capital requirements are normally estimated to the tune of production policies, nature of the business, length of manufacturing process, credit policy and so on. The need of the working capital is determined on the basis of duration of the production cycle. The time duration taken by the manufacturing process should be considered from the stage of raw materials to the stage of finished goods. The cycle of the business should be relatively considered for the need of working capital. The credit policy of the firm is another determinant for the determination of the working capital. There are two different credit policies viz liberal and stringent credit policies. The management of cash resources should be not only in a position to afford liquidity but also it should not require the firm to keep the cash resources simply idle; which should be invested in the marketable securities to earn some rate of return whenever the firm feel excessive holding of cash resources. Banks provide certain services to the firms only on the basis of the certain amount of balances in the accounts. That is the motive holding cash resources to avail services from the banker viz compensation motive. Timely supply of the goods to the requirements, facilitates the firm to earn greater volume of earning.Reordering Level is the level at which the firm should go for fresh purchase requisition of material through the store keeper to meet the requirements. There are few models exercise the inventory control, which facilitates the firm to avoid either under or over stocking

  • ABC Analysis
  • VED Analysis

All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Accounts and Finance for Managers Topics