Post 1-nirupama
Working capital Management
Cash Conversion Cycle
Cash conversion cycle is the period it takes a company to convert its investments in inventory and other resources to cash flows from sales. The cash conversion cycle measure the time that each net input is in the production and sales process before it is turned into cash received (Cash Conversion Cycle, 2016). Cash conversion cycle depends on the time needed by the company to sell its inventory, the time taken to collect the receivables and the time taken to pay all the bills without experiencing penalties. It is a quantitative measure that is used to evaluate the efficiency of the company.
Cash Budget
It is the estimated flow of cash in and out of a business over a certain period of time. It helps in evaluating whether an item has enough cash to operate. It is created from sales and production forecast as well as the assumptions of necessary spending and accounts receivables.
Credit policy
Credit policies are a set of roles used to determine the customers who are extended credit and billed (Michalski, 2014). The credit policies provide payment rules for those who have credit while it defines the limit to set an outstanding credit account. Credit policies provide the steps and procedures for the delinquent accounts.
Inventory management
Inventory management is used mainly to specify the shape and placement of stocked goods. Inventory management is used in many sectors within an organization or in many locations of supply network to manage the regular or planned courses of production and stock of materials
Informing Decision Making
Informing decision making is important in the success of organizations especially when dealing with financial issues in the organization. Informing decision making takes place when data is used to represent or support the decisions made concerning the financial status of organizations. For instance, working capital management represents the use of informing decision making (Importance of working capital management, 2017). In this case or scenario, data is used to show the efficiency of an organization. It can be used to identify the performance of an organization. The use of data o inform business decisions serves as a means of providing evidence as to why certain decisions are made. The financial decisions of an organization require precise and straight forward information or data so as to support the business decisions. This is because for an organization to make any decisions, the financial data should be presented.
In such a scenario, informing decisions making is entirely utilized. From the time when data is collected to the time it is presented, the informing decision making is put into action because the information is used either right away or in the future to make important business decisions. Informed decisions are used to run the daily, weekly or annual business operations because they are believed to be important information (Potocan, 200 ...
Explore beautiful and ugly buildings. Mathematics helps us create beautiful d...
Post 1-nirupamaWorking capital ManagementCash Conversion Cycle.docx
1. Post 1-nirupama
Working capital Management
Cash Conversion Cycle
Cash conversion cycle is the period it takes a company to
convert its investments in inventory and other resources to cash
flows from sales. The cash conversion cycle measure the time
that each net input is in the production and sales process before
it is turned into cash received (Cash Conversion Cycle, 2016).
Cash conversion cycle depends on the time needed by the
company to sell its inventory, the time taken to collect the
receivables and the time taken to pay all the bills without
experiencing penalties. It is a quantitative measure that is used
to evaluate the efficiency of the company.
Cash Budget
It is the estimated flow of cash in and out of a business over a
certain period of time. It helps in evaluating whether an item
has enough cash to operate. It is created from sales and
production forecast as well as the assumptions of necessary
spending and accounts receivables.
Credit policy
Credit policies are a set of roles used to determine the
customers who are extended credit and billed (Michalski, 2014).
The credit policies provide payment rules for those who have
credit while it defines the limit to set an outstanding credit
account. Credit policies provide the steps and procedures for the
delinquent accounts.
Inventory management
Inventory management is used mainly to specify the shape and
placement of stocked goods. Inventory management is used in
many sectors within an organization or in many locations of
supply network to manage the regular or planned courses of
production and stock of materials
Informing Decision Making
Informing decision making is important in the success of
2. organizations especially when dealing with financial issues in
the organization. Informing decision making takes place when
data is used to represent or support the decisions made
concerning the financial status of organizations. For instance,
working capital management represents the use of informing
decision making (Importance of working capital management,
2017). In this case or scenario, data is used to show the
efficiency of an organization. It can be used to identify the
performance of an organization. The use of data o inform
business decisions serves as a means of providing evidence as
to why certain decisions are made. The financial decisions of
an organization require precise and straight forward information
or data so as to support the business decisions. This is because
for an organization to make any decisions, the financial data
should be presented.
In such a scenario, informing decisions making is entirely
utilized. From the time when data is collected to the time it is
presented, the informing decision making is put into action
because the information is used either right away or in the
future to make important business decisions. Informed decisions
are used to run the daily, weekly or annual business operations
because they are believed to be important information (Potocan,
2001). In addition to that, informing decisions may affect the
nature of the decisions. To sum up, the decisions made in daily
business operations deal with data and it is therefore correct to
say that business decisions are informed decisions.
References
Importance of working capital management [Video file]. (2017,
May 12). Retrieved from https://youtu.be/maF024vY1es
Potocan, V. (2001). How to Provide for an Appropriate Dealing
with Business Decision-Making from the Viewpoint of
Informing. Proceedings of the 2001 InSITE Conference.
doi:10.28945/2378
Cash Conversion Cycle [Video file]. (2016, January 11).
Retrieved from https://youtu.be/iNm8sNDjDgs
3. Michalski, G. (2014). Working Capital Management in the
Business Context. Value-Based Working Capital Management,
7-31. doi:10.1057/9781137391834_2
Post -2 Mani
Working Capital = Current Assets - Current Liabilities
Working Capital is in any other case referred to as turning or
coursing capital or here and now capital. George William
Collins expressed that working capital is the piece of
contemporary sources surpass present day liabilities, which is
characterized as net working capital. Hyun-Han Shin and Luc
Soenen centred on that effective working capital administration
should suppose about investors' esteem. There are two ideas of
working capital, Gross and Net. Net working capital means the
mixture cutting-edge resources. Net working capital can be
expounded in two exceptional ways, the distinction between
modern-day assets and modern-day liabilities and the section of
contemporary sources which is financed with long haul
reserves. (Park, C. and Gladson, J. 1964)
Efficacious working capital administration needs a popular
examination on nature, as economic condition, current features
and its very own attributes. Proficient working capital
administration mode can also base on dispersion channel or
esteem tie which centres around up and downstream
administration, and also the inward advent connect. The
enterprise deposit quickens income, at that point to understand
the productive working capital administration. With the opening
usual markets and a creating use of budgetary subsidiaries,
Wang Zhuquan introduced a few innovative modes for working
capital administration, for example, alternate credit score
protection, repurchase make certain deals. It has been recorded
in concentrates that efficient working capital administration
comprises arranging and control of modern-day resources and
contemporary liabilities in pulverizing threat of organizations
potential to meet right here and now obligations in a single
4. hand, and in the different hand counteractive motion at
overabundance contributing of advantages. (Working capital.
1986)
In budgetary writing, Working capital administration isn't
always new issue. It has been regarded in concentrates that
there is a vital connection between the execution and working
capital administration via making use of specific factors for the
investigation. Specialists have expressed thought of working
capital administration in quite number methods that it is
productive administration of money resources and
liabilities. (Working capital. 2012)
Reference
Park, C. and Gladson, J. (1964). Working capital. Collier-
Macmillan: Macmillan (N.Y.).
Working capital. (1986). England: Business Support Group of
the Institute of Chartered Accountants in England and Wales.
Working capital. (2012). Place of publication not identified:
Book On Demand.
Post-3 saiprakash
The term working capital alludes to the measure of capital
which is promptly accessible to an organization. That is,
working capital is the contrast between assets in real money or
promptly convertible into money (Current Assets) and
hierarchical responsibilities for which money will before long
be required (Current Liabilities).
Current Assets are assets which are in real money or will before
long be changed over into money in "the normal course of
business”, Current Liabilities are responsibilities which will
before long require money repayment in "the conventional
course of business" ( By M.Y.Khan / P.K Jain in 2007).
Thus:
WORKING CAPITAL = CURRENT ASSETS-CURRENT
LIABILITIES
The Importance of Good Working Capital Management
5. From an organization's perspective, abundance working capital
means working wasteful aspects. Cash that is tied up in stock or
cash that clients still owe to the organization can't be utilized to
satisfy any of the organization's commitments. Along these
lines, if an organization isn't working in the most effective way
(moderate gathering), it will appear as an expansion in the
working capital. This can be seen by contrasting the working
capital starting with one period then onto the next; moderate
accumulation may flag a basic issue in the organization's tasks
By Lazaridis, I. and D. Tryfonidis, (2006).
Ways to deal with Working Capital Management
The goal of working capital administration is to keep up the
ideal equalization of every one of the working capital parts.
This incorporates ensuring that reserves are held as money in
bank stores for whatever length of time that and in the biggest
sums conceivable, along these lines amplifying the premium
earned. Be that as it may, such money may all the more suitably
be "contributed" in different resources or in lessening different
liabilities. As of late there has been an expanded spotlight on
Dynamic Discounting as a methods for streamlining Working
Capital. This strategy includes the early installment for
merchandise and enterprises purchased in kind at a limited cost.
Worked legitimately, this can give a huge profit for working
capital.
Working capital administration happens on two dimensions by
Van Horne, J. C. and J. M. Wachowicz, (2000)
Ratio examination can be utilized to screen by and large
patterns in working capital and to recognize regions requiring
nearer administration
The individual segments of working capital can be viably
overseen by utilizing different systems and procedures
Moreover, working capital administration isn't an end in itself.
It is an essential piece of the office's general administration.
The requirements of effective working capital administration
must be considered in connection to different parts of the
office's money related and non-budgetary execution.
6. References:
M.Y.Khan / P.K Jain, Financial Management Text, Problem’s
Cases, 5TH Edition,Tata McGraw –Hill Publishing Company
Limited, New Delhi, 2007.
Lazaridis, I. and D. Tryfonidis, (2006). Relationship between
Working Capital Management and Profitability of Listed
Companies in the Athens Stock Exchange.
Van Horne, J. C. and J. M. Wachowicz, (2000). Fundamentals
of Financial Management.Eleventh edition, Prentice Hall Inc.