This document provides information on working capital management. It discusses key concepts related to working capital such as net working capital, gross working capital, and approaches to financing working capital. The conservative, aggressive, and matching approaches are explained. Components of working capital like cash, inventory, debtors, and creditors are also summarized. Techniques for managing these components like economic order quantity, stock levels, and cash management models are outlined as well.
Meaning
Types of working capital
Factors of determining working capital
Operating working capital cycle
Importance of operating cycle concept
Internal factors
External factors
General factors
Types of capital structure
Characteristics of security
this slide will give you a brief idea about cash management and motives for holding cash...its very simple slide...you can easily understand the context with the help of pictures
Presentation on "Capital Market"
1.definition and characteristics
2.function and players
3.importance/role and types
4.factor and structure
5.reforms and development
Working capital management — factors determining working capital — estimation of working capital —inventory management techniques — receivables management — management of cash and marketable securities — techniques of cash management — committees on working capital and their findings and recommendations.
Meaning
Types of working capital
Factors of determining working capital
Operating working capital cycle
Importance of operating cycle concept
Internal factors
External factors
General factors
Types of capital structure
Characteristics of security
this slide will give you a brief idea about cash management and motives for holding cash...its very simple slide...you can easily understand the context with the help of pictures
Presentation on "Capital Market"
1.definition and characteristics
2.function and players
3.importance/role and types
4.factor and structure
5.reforms and development
Working capital management — factors determining working capital — estimation of working capital —inventory management techniques — receivables management — management of cash and marketable securities — techniques of cash management — committees on working capital and their findings and recommendations.
Capital Structure Planning for MBA Students
Please follow below link for more MBA projects.
http://www.final-yearproject.com/2011/04/mba-summer-internship-program-sip.html
Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital is equal to current assets. Working capital is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit and Negative Working capital
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
1. Unit IV
Financial Management
• Management of Working Capital: Concepts of
working Capital
• Approaches to the financing of current
Assets
• Determining capital (with numerical problems)
• Management of different components
of working capital.
Prepared by:-
Dr. Waqar Ahmad
Asstt. Professor
Allenhouse Business School
2. WORKING CAPITAL
• Working capital management involves the
relationship between a firm's short-term assets
and its short-term liabilities.
• The basic goal of working capital management
is to ensure that a firm is able to continue its
operations and that it has sufficient ability to
satisfy both maturing short-term debt and
upcoming operational expenses.
3. SINGNIFICANCE OF WORKING CAPITAL
MANAGEMENT
In a typical manufacturing firm, current assets exceed one-half
of total assets.
Excessive levels can result in a substandard Return on
Investment (ROI).
Current liabilities are the principal source of external financing
for small firms.
Requires continuous, day-to-day managerial supervision.
Working capital management affects the company’s risk,
return, and share price.
4. WORKING CAPITAL CONCEPTS
Net Working Capital
Net working capital refers to the difference between
current assets and current liabilities. Current liabilities are
those claims of outsider, which are expected to mature
For payment within an accounting year & include creditors,
bills payable & the outstanding expenses. In other words you
can say that this is the excess of current assets over current
liabilities.
Current Assets – Current Liabilities
5. WORKING CAPITAL CONCEPTS
Gross Working Capital
• It refers to the firm’s investment in current assets.
• Current assets are the assets, which can be converted into
cash within an accounting year or within an operating cycle
• cash, short-term securities, debtors (accounts receivable &
book debts), bills receivable and stock.
Working capital turnover
Working capital turnover= sales/working capital
Working Capital Management
The administration of the firm’s current assets and the
financing needed to support current assets.
6. CURRENT ASSETS
• Inventories: Inventories represent raw materials and
components, work-in-progress and finished goods.
Trade Debtors: Trade Debtors comprise credit sales to
customers.
Prepaid Expenses: These are those expenses, which have been
paid for goods and services whose benefits have yet to be
received.
Loan and Advances: They represent loans and advances given
by the firm to other firms for a short period of time.
Investment: These assets comprise short-term surplus funds
invested in government securities, shares and short-terms bonds.
Cash and Bank Balance: These assets represent cash in hand
and at bank, which are used for meeting operational
requirements. One thing you can see here is that this current
asset is purely liquid but non-productive.
7. CURRENT LIABILITY
Sundry Creditors: These liabilities stem out of
purchase of raw materials on credit terms usually for a
period of one to two months.
Bank Overdrafts: These include withdrawals in
excess of credit balance standing in the firm’s current
accounts with banks
Short-term Loans: Short-terms borrowings by the
firm from banks and others form part of current
liabilities as short-term loans.
Provisions: These include provisions for taxation,
proposed dividends and contingencies.
8. WORKING CAPITAL FORMAT
CURRENT ASSETS CURRENT LIABILITIES
• Cash
• Accounts receivable
• Notes receivable
• Marketable securities
• Inventory
• Prepaid expenses
Total current assets
• Accounts payable
• Notes payable
• Accrued expenses
• Taxes payable
Total current liabilities
9. POINTS KEPT IN MIND WHILE PLANNING
1. Excessive investment (Profitability)
• It results in unnecessary accumulation of
inventories. Thus, chances of inventory
mishandling, waste, theft & losses increase.
• It is an indication of defective credit policy &
slack collection period.
• Excessive WC makes management complacent,
which degenerates into managerial inefficiency.
• Tendencies of accumulating inventories tend to
make speculative profits grow.
10. POINTS KEPT IN MIND WHILE PLANNIN CONT…
2. Inadequate investment (Liquidity)
It stagnates growth.
It become difficult to implement operating plans and
achieve the firm’s operating profit target.
Operating inefficiencies creep in when it becomes difficult
even to meet day-to-day commitments.
Fixed assets are not efficiently utilized for the lack of
working capital funds. Thus, the firm’s profitability would
deteriorate.
Paucity of WC funds render the firm unable to avail
attractive credit opportunities.
The firm loses its reputation when it is not in a position to
honour its short-term obligations.
11. KINDS OF WORKING CAPITAL
1.Permanent working capital
Permanent working capital is the minimum amount of
current assets, which is needed to conduct a business even
during the dullest season of the year.
The minimum level of current assets is called permanent or
fixed working capital as this part is permanently blocked in
current assets.
Characteristics of Permanent working capital
It is classified on the basis of the time period
It constantly changes from one asset to another and
continues to remain in the business process.
Its size increase with the growth of business operations.
13. Permanent working capital CONT…
2.Temporary working capital
Temporary working capital represents a certain amount of
fluctuations in the total current assets during a short period.
Variable working capital is the amount of additional current
asset that are required to meet the seasonal needs of a
firm, so is also called as the seasonal working capital.
Characteristics of Temporary working capital
It is not always gainfully employed, though it may change
from one asset to another asset, as permanent working
capital does.
It is particularly suited to business of a seasonal or cyclical
nature.
15. DETERMINANTS OF WORKING CAPITAL
• Nature of business
• Terms of sales and purchases
• Manufacturing cycle
• Rapidity of turnover
• Business cycle
• Changes in technology
• Seasonal variation
• Market conditions
• Seasonality of operation
• Dividend policy
• Working capital cycle
16. Importance of Working Capital:
• It helps measure profitability of an enterprise. In its absence, there
would be neither production nor profit.
• Without adequate working capital an entity cannot meet its short-
term liabilities in time.
• A firm having a healthy working capital position can get loans easily
from the market due to its high reputation or goodwill.
• Sufficient working capital helps maintain an uninterrupted flow of
production by supplying raw materials and payment of wages.
• Sound working capital helps maintain optimum level of investment
in current assets.
• It enhances liquidity, solvency, credit worthiness and reputation of
enterprise.
• It provides necessary funds to meet unforeseen contingencies and
thus helps the enterprise run successfully during periods of crisis.
18. Approaches of Working Capital
1.Conservative Approach
2.Aggressive Approach
3.Matching Approach or Hedging
Approach
19. Conservative Approach
1. Conservative approach is a risk-free strategy
of working capital financing.
2. A company adopting this strategy maintains a higher
level of current assets and therefore higher working
capital also.
3. The major part of the working capital is financed by
the long-term sources of funds such as equity,
debentures, term loans etc. So, the risk associated
with short-term financing is abolished to a great
extent.
20. Conservative Approach
In the conservative approach, fixed assets,
permanent working capital and a part of temporary
working capital is financed by long-term financing
sources and the remaining part only is financed by
short-term financing sources.
Financing Strategy in Equation:
Long Term Funds will Finance = Fixed Assets +
Permanent Working Capital + Part of Temporary
Working Capital
Short Term Funds will Finance = Remaining Part
of Temporary Working Capital
22. Conservative Approach Diagram
The dotted lines horizontal line indicates the point till
which the long-term funds will be utilized. The dotted
vertical lines indicate the sources of finance and they
are tagged as ‘long-term financing’ and ‘short term
financing’.
We can easily make out that long term funds are
financing total fixed assets, total permanent assets and
a part of the temporary or seasonal working capital
also. Seasonal requirement or temporary working
capital has peaks and troughs. The two areas of troughs
below the long-term financing line indicate that there
are idle long term funds incurring unnecessary interest
cost.
23. Conservative Approach
Advantage of Conservative Approach
1. Smooth Operation
2. No Insolvency Risk
Disadvantage of Conservative Approach
1. Higher Interest Cost
2. Idle Fund
3. Higher Carrying Cost
4. Inefficient working capital Management
24. Aggressive Approach
The aggressive approach is a high-risk strategy
of working capital financing wherein short-term finances
are utilized not only to finance the temporary working
capital but also a reasonable part of the permanent
working capital.
In this approach of financing, the levels of inventory,
accounts receivables and bank balances are just
sufficient with no cushion for uncertainty. There is a
reasonable dependence on the trade credit.
25. Aggressive Approach
Fixed assets and a part of permanent working capital are
financed by long-term financing sources and the
remaining part of permanent working capital and total
temporary working capital is only is financed by short-
term financing sources. It is explained in the equation
below:
Financing Strategy in Equation:
Long Term Funds will Finance = Fixed Assets +
Part of Permanent Working Capital
Short Term Funds will Finance = Remaining Part
of Permanent Working Capital + Temporary Working
Capital
27. Aggressive Approach
The dotted lines horizontal line indicates the point till
which the long-term funds will be utilized. The dotted
vertical lines indicate the sources of finance and they
are tagged as ‘long-term financing’ and ‘short term
financing’.
We can easily make out that long term funds are
financing total fixed assets and a part of permanent
assets. A major part of Seasonal requirement or
temporary working capital is financed by short term
source of finance. In this approach, the difficult area is
the part of permanent working capital which is
financed by short-term sources. It can pose problems
of liquidity and bankruptcy to the firm.
28. Aggressive Approach
Advantage of Aggressive Approach
1. Lower Financing Cost, High Profitability
2. Lower Carrying and Handling Cost
3. Highly Efficient Working Capital Management
Disadvantage of Aggressive Approach
1. Insolvency Risk
2. Lost Opportunities and Unexpected Shocks
29. Matching Approach or Hedging
Approach
Maturity matching or hedging approach is a strategy
of working capital financing wherein short term
requirements are met with short-term debts and long-
term requirements with long-term debts.
The underlying principal is that each asset should be
compensated with a debt instrument having almost the
same maturity.
30. Matching Approach or Hedging
Approach
Maturity Matching or Hedging Approach Equation
This matching approach of working capital
financing can be explained in terms of a simple
equation as follows:{
Long Term Funds will Finance = Fixed Assets +
Permanent Working Capital
Short Term Funds will Finance = Temporary
Working Capital
32. Matching Approach or Hedging Approach
In the diagram, we can see three levels, each of fixed assets,
permanent working capital and temporary working capital.
The red vertical line with white spaces represents the type of
financing.
The bigger line which stretches till permanent working capital
is long-term financing and a smaller line is the temporary
working capital. The line from where the temporary working
capital starts and the line of a hedging strategy is the same.
Any strategy below this line will be an aggressive strategy and
a strategy above it will be a conservative strategy.
33. Matching Approach or Hedging Approach
RATIONALE BEHIND MATURITY MATCHING
OR HEDGING APPROACH
Knowing why to apply maturity matching strategy is
very important. It suggests financing permanent
assets with long-term financing and temporary with
short-term financing. Now let us suppose opposite
situations and see. There can two such situations.
34. Matching Approach or Hedging Approach
1. Permanent Assets Financed with
Short Term Financing
2. Temporary Assets Financed with
Long Term Financing
36. 1.Cash Management
Business concern needs cash to make payments for acquisition
of resources and services for the normal conduct of business.
Cash is one of the important and key parts of the current
assets.
Cash is the money which a business concern can disburse
immediately without any restriction. The term cash includes
coins, currency, cheques held by the business concern and
balance in its bank accounts. Management of cash consists of
cash inflow and outflows, Cash flow within the concern and
cash balance held by the concern etc.
37. Motives for Holding Cash
1. Transaction motive
It is a motive for holding cash or near cash to meet routine cash requirements to
finance transaction in the normal course of business. Cash is needed to make
purchases of raw materials, pay expenses, taxes, dividends etc.
2. Precautionary motive
It is the motive for holding cash or near cash as a cushion to meet unexpected
contingencies. Cash is needed to meet the unexpected situation like, floods strikes
etc.
3. Speculative motive
It is the motive for holding cash to quickly take advantage of opportunities typically
outside the normal course of business. Certain amount of cash is needed to meet
an opportunity to purchase raw materials at a reduced price or make purchase at
favourable prices.
4. Compensating motive
It is a motive for holding cash to compensate banks for providing certain services or
loans. Banks provide variety of services to the business concern, such as clearance
of cheque, transfer of funds etc.
38. Cash Management Techniques
Managing cash flow constitutes two important parts:
A. Speedy Cash Collections.
B. Slowing Disbursements.
The techniques aim at, the customer who should be encouraged to
pay as quickly as possible and the payment from customer without
delay. Speedy Cash Collection business concern applies some of the
important techniques as follows:
•Prompt Payment by Customers
•Early Conversion of Payments into Cash
•Concentration Banking
•Lock Box System
39. Slowing Disbursement
An effective cash management is not only in the part of
speedy collection of its cash and receivables but also it
should concentrate to slowing their disbursement of cash
to the customers or suppliers. Slowing disbursement of
cash is not the meaning of delaying the payment or
avoiding the payment. Slowing disbursement of cash is
possible with the help of the following methods:.
1. Avoiding the early payment of cash
2. Centralised disbursement system
40. Cash Management Models
Baumol model
The basic objective of the Baumol model is to determine the minimum cost
amount of cash conversion and the lost opportunity cost. Total conversion cost
per period can be calculated with the help of the following formula:
t= Tb
C
Opportunity cost can be calculated with the help of the following formula;
i = C
2
Optimal cash conversion can be calculated with the help of the following formula;
C = 2bT
i
where,
T = Total transaction cash needs for the period
b = Cost per conversion
C = Value of marketable securities
where,
i = interest rate earned, C/2 = Average cash balance,
C = Optimal conversion amount
b = Cost of conversion into cash per lot or transaction
T = Projected cash requirement
i = interest rate earned
41. Management for different
components of working capital
Orgler’s model
Orgler model provides for integration of cash
management with production and other aspects of
the business concern. Multiple linear programming
is used to determine the optimal cash management.
Orgler’s model is formulated, based on the set of
objectives of the firm and specifying the set of
constrains of the firm.
42. 2. Inventory Management
Inventory constitutes a major part of total working
capital. Efficient management of inventory results in
maximization of earnings of the shareholders.
Efficient inventory management consists of managing
two conflicting objectives:
1. Minimization of investment in inventory on the one
hand
2. Maintenance of the smooth flow of raw materials
for production and sales on the other.
43. Types of Inventory
1. Raw-Materials Inventory
2. Work-in-Process Inventory
3. Finished-Goods Inventory
4. Stock of Cash
45. Inventory Management Techniques
1. Economic order quantity
Economic Order Quantity (EOQ) is one of the important
techniques of inventory management. EOQ represents
that level of inventory which minimizes the total
inventory cost.
The formula for calculating EOQ is given below:
EOQ = √2QA / K
Where,
Q = Annual requirement or Production,
A = Ordering Cost per order, and
K = Carrying Cost per unit per Year.
46. Inventory Management Techniques
2. Fixation of stock levels
Efficient inventory management requires an
effective stock control system. One of the
important aspects of inventory control is
stock level.
Level of stock has a significant bearing on the
profitability. Over-stocking requires large
capital investments whereas under-stocking
affects flow of the production process.
The following are the levels of stock fixed for
efficient management of inventory.
48. Inventory Management Techniques
3. ABC Analysis
ABC Analysis is one of the important inventory control
techniques.
In a big manufacturing concern it is not always possible to pay
equal attention to each and every raw material.
In such cases raw materials are classified according to their
value so that proper control may be exercised on materials
having high value.
ABC Analysis is an analytical technique that tries to group
materials into three categories on the basis of cost involved.
49. Inventory Management Techniques
3. ABC Analysis
The categories are:
A – High value materials
B – Medium value materials
C – Low value materials
50. Inventory Management Techniques
4. Just in Time (JIT)
Just in time (JIT) inventory control system was developed by Taiichi
Okno of Japan and was first introduced in Toyata Manufacturing
Company of Japan. So it is also known as Toyata Production
Method. The basic idea behind this system is that a firm should
keep minimum level of inventory on the assumption that suppliers
will deliver the raw materials as and when required. This system
tries to make inventory carrying cost as zero.
Three important elements of JIT are Just in time purchasing, just in
time production and just in time supply. Just in time purchasing,
just in time production and just in time delivery can be effectively
applied through adoption of advanced manufacturing technology.
51. 4. Accounts Payable Management:
Payables or creditors are one of the important components
of working capital. Payables provide a spontaneous source of
financing of working capital. Payable management is very
closely related with the cash management. Effective payable
management leads to steady supply of materials to a firm as
well as enhances its reputation.
It is generally considered as a relatively cheap source of
finance as suppliers rarely charge any interest on the amount
owed. However, trade creditors will have a cost as a result of
loss of enjoying cash discount on cash purchases.