Estimating working capital requirements, Managerial Accounting

The most ticklish difficulty that is faced through the finance manager is the resolve of the amount of working capital requirement at a specific level of production. To resolve this difficulty, estimates of future needs of current assets and cash flows are made. Along with the help of these cash flows, availability of cash and future needs for current assets is ascertained. For this reason a working capital forecast is prepared including some computations after getting in consideration the factors affecting working capital as discussed above about this. All these computations are created on cash basis. Hence, estimation of working capital is the resolving of future cash needs of a firm hence the liquidity of financial resources may be kept. Subsequent methods are usually used in estimating working capital for the future period as:

a) Operating Cycle Method

b) Net Current Assets Forecasting Method

c) Projected Balance Sheet Method

d) Adjusted Profit and Loss Method

e) Cash Flow Forecast Method

Posted Date: 4/9/2013 3:17:05 AM | Location : United States

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