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Dangers of deficiency of working capital
· It may lead to business failure
· The firm cannot take advantage of new opportunity or adopt change
· Trade discount will be lost
· Cash discount will be lost
· Financial reputation will be lost
· Creditors may apply to court for winding up
· It affects dividend policy adversely
· The company cannot utilize its fixed assets properly
Dangers of Excessive working capital
· Excessive working capital means idle funds in the business which gives no profit. Thus the rate of return falls.
· The value of share may fall due to lower rate of return on investment.
· Efficiency of management may be declined.
· It may lead to speculation among the public
· Increased bad debt and wastage
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What is the optimum working capital?
Optimum working capital is that point where working capital is neither short from requirements nor excess working capital available at any time during fiscal year.
What type of account is paid in capital in excess of par?
Paid in capital in excess of par is called "Share premium account"
Is the excess of current assets over current liabilities is called working capital?
true per my accounting book these wiki answers have helped me pass my tests!!
What type of account is paid-in capital in excess of par?
additional paid in capital
Capital paid in excess of par common stock?
Capital amount paid for excess of par value of common stock is called "Share premium amount" which is also part of capital of business.
What is optimal working capital?
Optimal working capital is that point where exact amount of working capital is available to run day to day activities and there is no excess or shortage of working capital at any point.
What is the optimum working capital?
Optimum working capital is that point where working capital is neither short from requirements nor excess working capital available at any time during fiscal year.
working capital?
working capital is the excess of current assets over current liabilities. if current assets are more than current liabilities, the company has surplus working capital, which is a good sign of liquidity. working capital is calculated as follows:Working capital = Current assets - Current liabilities
What type of account is paid in capital in excess of par?
Paid in capital in excess of par is called "Share premium account"
Managing short term asset and liabilities is sometimes called ------- management?
Management of short term assets (current assets) and short term liabilities (current liabilities) is commonly known as working capital management.Working capital is a requirement of funds to meet the day to day working expenses. In a simple term working capital is an excess of current assets over the current liabilities. In working capital management we focus more on receivables management, cash management and inventory management etc. Proper way of management of working capital is highly essential to ensure a dynamic stability of the financial position of an organization.
Is the excess of current assets over current liabilities is called working capital?
true per my accounting book these wiki answers have helped me pass my tests!!
What type of account is paid-in capital in excess of par?
additional paid in capital
Capital paid in excess of par common stock?
Capital amount paid for excess of par value of common stock is called "Share premium amount" which is also part of capital of business.
What are the dangers of a tummy tuck and liposuction?
The main dangers of a tummy tuck and liposuction are infection. All surgeries carry this risk. In addition, you can get scarring, and excess skin, which might have to be removed by another operation.
What does paid in capital account represent?
par value of common and preferred stock+additional paid in capital(amount in excess of par)
What are the characteristics of working capital?
Working capital is a fundamental concept in financial management, and it possesses several key characteristics that are important for businesses to understand and manage effectively. Here are the primary characteristics of working capital: Short-Term Nature: Working capital deals with assets and liabilities that are expected to be converted into cash or settled within a relatively short period, usually one year or less. This short-term focus distinguishes it from long-term capital. Liquidity: Working capital includes assets that can be quickly converted into cash or used to pay off short-term liabilities. Maintaining sufficient liquidity in the form of cash or easily convertible assets is crucial for covering immediate financial obligations. Operating Cycle: It is closely tied to a company's operating cycle, which is the time it takes to convert raw materials into finished products, sell them, and collect cash from customers. Effective management of the operating cycle can optimize working capital. Cyclical Nature: Working capital needs may fluctuate throughout the business cycle. For instance, a retailer may require more working capital to support increased inventory during the holiday season. Dynamic and Variable: The working capital requirements of a business can change over time due to factors like growth, seasonality, market conditions, and economic cycles. Companies must adapt their working capital strategies accordingly. Risk Management: Inadequate working capital can lead to financial instability, while excess working capital can result in reduced profitability. Striking the right balance is crucial for risk management and sustainable operations. Impact on Creditworthiness: Lenders and investors often assess a company's working capital position when evaluating its creditworthiness and financial health. A strong working capital position can enhance a company's ability to secure financing. Working Capital Ratio: The working capital ratio, calculated as current assets divided by current liabilities, is a key financial metric used to assess a company's liquidity and short-term financial health. A ratio above 1 indicates positive working capital. Efficiency Indicator: Managing working capital efficiently can improve operational efficiency by reducing costs associated with carrying excess inventory or financing short-term debt. Strategic Management: Working capital management is a strategic activity that involves decisions about cash flow, inventory levels, accounts receivable, and accounts payable. Effective management can enhance profitability and competitiveness. Seasonality Considerations: Some businesses may experience seasonal variations in working capital needs, requiring careful planning and management to meet peak demand periods. Continuous Monitoring: Given its dynamic nature, working capital requires continuous monitoring and adjustment to ensure that the company remains financially stable and can meet its short-term obligations. In summary, working capital is a dynamic and crucial aspect of a company's financial management, influencing its liquidity, financial health, and ability to operate effectively. Effective working capital management involves maintaining an appropriate balance between current assets and liabilities to support day-to-day operations and strategic growth.
the excess of revenue over the expenses incurred in earning the revenue is called capital?
False
