Describe the main elements of working capital management, Financial Management


(a) Describe the main elements of Working capital management?

(b) Belle Rive Ltd

Belle Rive Ltd has an annual turnover of Rs 60 million of which 80% is on credit. Debtors are allowed one month to clear off all the dues. A factor is willing to advance 90% of the bills raised on credit for a fee of 2% a month plus a commission of 4% on the total amount of debts. As a consequence, Belle Rive Ltd is likely to save Rs 216,000 annually in management costs and avoid bad debts at 1% on the credit sales.

On the other hand, a financial institution has proposed to make an advance equal to 90% of the debts at an interest rate of 18% per annum with a processing fee of 2% on the debts.

Which of the options would you recommend? Support your recommendations by detailed calculations.

Posted Date: 11/28/2013 2:32:16 AM | Location : United States

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