It is the most practical way of estimating working capital needs. In such method, the finance manager gets ready a working capital forecast. While preparing such forecast, firstly an estimate of all the current assets is created on a monthly basis. Hence, estimate of stock of raw materials, amount of raw material which will continue in process, outstanding amount from debtors and stock of finished goods and other receipts will have to be completed. It should be followed through an estimate of current liabilities comprising outstanding payments for rent, wages, material and administrative and the other expenses. The diversity in between the forecasted amount of current liabilities and assets offers the networking capital requirements for the firm.

To such amount, a flat percentage would be added through way of provision for contingencies. The resulting diagram will be the amount of net estimated working capital needed. By this, bank finance is to be subtracted, if obtainable. The left balance will be the amount of working capital which is to be managed through the firm. The way of forecasting working capital requires is 'cash' skill as all transactions are demonstrated on cash cost basis.

Posted Date: 4/9/2013 3:21:19 AM | Location : United States

Ask an Expert

Related Discussions:- Net current assets forecasting method, Assignment Help, Ask Question on Net current assets forecasting method, Get Answer, Expert's Help, Net current assets forecasting method Discussions

Write discussion on Net current assets forecasting method
Your posts are moderated

Write your message here..

Related Questions

Explain ranking of decision packages - zero base budgeting, Explain Ranking... Explain Ranking of decision packages - zero base budgeting Ranking of decision packages: by ranking the decision packages a company will be able to weed out a lot of marginal e

Financial accounting , Financial Accounting Which is concerned with th... Financial Accounting Which is concerned with the provision of information to external parties outside the organization? It is the procedure of measuring, classifying, summariz

MOH Cost Help, During the year the company worked a total of 145,900 machin... During the year the company worked a total of 145,900 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,305,346. What is the amount of underapplied o

Treasury management, Treasury management is explained as "the corporate han... Treasury management is explained as "the corporate handling of all financial matters, the production of external and internal funds for business, the management of cash flows and c

Financial statement, how to i get financial report for my company Anuz Wpp how to i get financial report for my company Anuz Wpp

Extensions to linear programming, Extensions to Linear Programming In man... Extensions to Linear Programming In many real situations the solutions to linear programming models make sense only if they have integer values. Rounding off the linear programmi

Working capital management, literature review of effects of working capital... literature review of effects of working capital on financial performance?

Need help, Pantheon Company has prepared the following forecasts of monthly... Pantheon Company has prepared the following forecasts of monthly sales: July August September October Sales (in units) 4,300 5,100 3,800 2,500 Pantheon has decided that the num

Testing the slope, Testing the Slope The strong point of the relationsh... Testing the Slope The strong point of the relationship among the dependent variable and each of the independent variables can be determined using 3 methods: 1) Correlation

Facets of cash management, Cash management is related along with the manage... Cash management is related along with the management of: Cash outflows and inflows of the firm Cash flows inside the firm Cash balances as financing deficit and inve