top button
Flag Notify
    Connect to us
      Site Registration

Site Registration

What are the different methods of working capital assessment?

+1 vote
158 views
What are the different methods of working capital assessment?
posted Jun 13, 2017 by Anurag Kashyap

Share this question
Facebook Share Button Twitter Share Button LinkedIn Share Button

1 Answer

0 votes

Working Capital Sources
--Own funds
--Bank borrowings
--Sundry Creditors
--Advances from customers
--Deposits due in a year
--Other current liabilities

Working Capital Assessment Methods
--Operating Cycle Method
--Traditional method
--Projected Balance Sheet method
--Cash Budget method
--Projected Annual Turnover method (Nayak Committee)

OPERATING CYCLE METHOD
Time taken between cash outlay and cash realisation through sale of finished goods & realisation of receivables is known as length of operating cycle. Consists of:

--Time taken to acquire and average storage period of raw material
--Conversion process time
--Average period for which finished goods are in store
--Average collection period of receivables (Sundry Debtors)

Projected Balance Sheet Method
--Proper examination of performance
-----Profitability
-----Financial Position
-----Financial Management

Scrutiny & Validation of Projections
-----Income & Expenses
-----Changes in Financial Position
-----Acceptability of Liquidity, Overall gearing, efficiency of operations

Cash Budget Method
--Applicable to seasonal industry (such as tea, sugar)
--Specific industry (such as Information Technology and software)
--Based on Peak Deficit projected as per cash flow statement

answer Jun 13, 2017 by Durga Prasad
...