Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Working capital cycle in a manufacturing business
Average time raw materials are in stock
+
Time taken to produce goods
Time taken by customers to pay for goods
Period of credit taken from suppliers
=
Working capital cycle (in days)
(Raw materials / purchases)x 365 days
(WIP & finished goods / cost of sales)x 365 days
(Trade receivables / credit sales)x 365 days
-(Trade payables / purchases)x 365 days
Please note that for "trade payable days" calculation, if information about credit purchases isn't known then cost of sales is used instead.
The shorter the cycle, thebetter it is for the company as it means:
Inventories are moving though the organisation rapidly.
Trade receivables are being collected quickly.
The organisation is taking the maximum credit possible from suppliers.
The shorter the cycle, the lower the company's reliance on external supplies of finance such as bank overdrafts which is costly.
Excessive working capital means too much money is invested in inventories and trade receivables. This signifies lost interest or excessive interest paid and lost opportunities (funds could be invested elsewhere and earn a higher return).
The longer the working capital cycle, the more capital is required to finance it.
Exam questions generally ask how working capital can be managed effectively. To answer the question you need to discuss overall working capital levels, and then individual components such as stock, debtors and creditors.
What is the relationship between the arithmetic average and the geometric average return for each stock and the S&P 500? Explain. Compare the standard deviations for each of the
Question 1: (a) Describe clearly the main theories of interest rate determination. (b) Critically assess the relationship between interest rate and Money supply. Questio
How can economies of scale be a characteristics that makes for a good industry (please be specific) and what industry (besides automobiles) do you consider to be a "good industry"
What do you notice about the alphas and betas calculated using the various methods? Using the alpha and beta you calculated for stock 4 along with the average excess return on the
I have an assignment I need help understanding how to do step by step abouot predictability on excess returns
Mary has a weekly allowance of $24 to spend on soda and coffee. Let 40 cups be the maximum amount of soda she can buy for the money. Let $.40 be the price of 1 cup of coffee. As
Within a business, funds are required to finance both non-current and current assets. The level of current assets fluctuates, though there tends to be an underlying lev
DX had the following balances in its trial balance at 30 September 2006: Trial balance extract at 30 September 2006 $000 $000 Revenue
what economic factors affect current account balances
Introduction - Overview of the business idea. A clear outline of what you intend to present and why you are presenting it in your chosen method or style Business Plan A clear
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd