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Working Capital management is affected through two characteristics of current assets that are as follows (i) short life span (ii) swift transformation in the other asset forms.
Current assets consist of a short life span, cash balances can stay idle for 7 to 14 days, whereas accounts receivable generally have a life span ranging from 30-90 days and inventories may be conducted for 30 to 100 days.
All current assets are transformed in another current asset. This transformation will base upon the time and degree of synchronization of sales, production, procurement and also collection of receivables.
The production method begins with the purchase of raw material resulting in either reduce in cash or creation of accounts payable. The raw material purchased by the inventory that is further processed to generate finished goods. Finished goods are sold resulting in either raise in cash or creation of accounts receivable whereas the discharge of accounts payable outcomes in cash outflow. The operating cycle and the current asset cycle are demonstrated in figures 1 and 2 correspondingly.
Figure: Current asset cycle
Figure: Operating Cycle
Incremental budgeting Incremental budgeting uses a budget prepared using a last period budget or actual performance as a base with incremental amount asses for the new budget p
Planning Planning is the fundamental function of the management by means of which the managers decide: What goals are to be accomplished How they will be accomplished.
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A local government authority owns and operates a leisure centre with numerous sporting facilities, residential accommodation, a cafeteria and a sports shop. The summer season lasts
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any accounting concept brifely explen
Is there a theory for financial ratios
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