Working Capital Management?
Indicate how each of the following six different transactions that Dynamic Mattress might make would affect (i) cash and (ii) net working capital: 1. Paying out a $2 million cash dividend. 2. A customer paying a $2,500 bill resulting from a previous sale. 3. Paying $5,000 previously owed to one of its suppliers. 4. Borrowing $1 million long-term and investing the proceeds in inventory. 5. Borrowing $1 million short-term and investing the proceeds in inventory. 6. Selling $5 million of marketable securities for cash
Working Capital Management...?
Indicate how each of the following six different transactions that Dynamic Mattress might make would affect (i) cash and (ii) net working capital: a. Paying out a $2 million cash dividend. b. A customer paying a $2,500 bill resulting from a previous sale. c. Paying $5,000 previously owed to one of its suppliers. d. Borrowing $1 million long-term and investing the proceeds in inventory. e. Borrowing $1 million short-term and investing the proceeds in inventory. f. Selling $5 million of marketable securities for cash.
What is working capital managment?
introductionOne of the most important area in the day to day management of the firm is the management of working capital. Working Capital management is the functional area of finance that covers all the current account of the firm. It is concerned with the management of the level of individual current assets as well as the management of total working capital.Working capital is described as the capital which is not fixed but the more common uses of the working capital are to consider it as the difference between the book value of current assets and current liabilities. We know that financial management means the procurement of funds and effective utilization of these procured funds.Meaning and Definitions (ReadMore)“Working capital means current assets” According to Mead, Baker, and Malott,The concept of Working CapitalWorking CapitalA. Gross Working CapitalIt Simply Known as working capital which implies a total of all current assets Gross Working Capital is a general concept which determines the working capital concept. Thus the gross working capital is the capital invested in total current assets of the business concern.GWC = Gross Working Capital,CA = Current AssetsGWC = CAB.Variable/Temporary working capital: That working capital is required to meet the seasonal demands special unforeseen events. The demands which are of seasonal nature require inventory. More adequate cash is required to overcome fluctuation in the market, to eliminate competition, etc. (read more)
Explain Working Capital Management ?
Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Working Capital = Current Assets − Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash.
What is factoring for working capital management?
Companies often transfer notes and accounts receivable prior to their maturity in order to accelerate cash flows. There are special factor companies who take over the management of your receivables. The factor company usually make an agreed amount of the receivables as advance. Of course they do not do it for free, They charge an upfront fee as a percentage of credit sales as well as interest for advance. In some cases, the factors assume the responsibility for bad debts. The company has the benefit of not running a full fledged collection department and thereby saving costs. I would suggest you visit www.investopedia.com, you will find a wealth of information.
What is the importance of working capital management?
Working capital management is critical to cash flow. Cash is to business as air is to humans - you can’t survive without it. Therefore collection of receivables, keeping low inventory and stretching payables will maximise cash flow.
What is working capital?
Working Capital:Capital or amount required to meet the short term or day-to-day requirements for the companies operations is called working capital.Working capital = Current Assets - Current Liabilities.Working capital ratio is a measure of short term financial health, that is (current assets)/(Current Liabilities) and the ratio between 1 to 2 is considered as healthy. If current liabilities are higher than current assets, it means company is not able to meet the short term liabilities, decline in working capital ratio can make company bankrupt. So when you analyze companies financial performance working capital plays vital role.Partner at Fyers - Your Next-Generation Online Stockbroker