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Explain the factors detemimining working capital requirements of a firm?
The nature of the business, seasonality of production and the production cycles are some of the factors that determine the working capital requirements of a firm.
What stream of income is not affected by how a firm is financed?
Net Working Capital
What are the different methods of estimating working capital requirement of a firm?
There are two main methods of estimating working capital within a firm. These include the conventional method which measures cash flow, and the concept of operating cycle.
The payment of a current liability will?
increase working capital
How sole traders increase their working capital?
dayum
If All else is constant an increase in a firm's cost of debt will do what?
will result in an increase in the firm's cost of capital.
How do calculate an increase in working capital?
To calculate an increase in working capital, first determine the working capital for two different periods by subtracting current liabilities from current assets for each period. The formula is: Working Capital = Current Assets - Current Liabilities. Then, subtract the earlier period's working capital from the later period's working capital. The difference will give you the increase in working capital.
Explain the factors detemimining working capital requirements of a firm?
The nature of the business, seasonality of production and the production cycles are some of the factors that determine the working capital requirements of a firm.
What shall be the firm repercussions if a firm has paucity of working capital and excess of working capital?
A paucity of working capital can lead to cash flow issues, hindering a firm's ability to meet short-term obligations and potentially resulting in insolvency. Conversely, an excess of working capital may indicate inefficiency, as funds that could be invested or used for growth are tied up in unproductive assets. Both scenarios can negatively impact a firm's profitability and competitiveness in the market. Effective management of working capital is essential to ensure financial health and operational efficiency.
What stream of income is not affected by how a firm is financed?
Net Working Capital
Why does a firm need to maintain an adequate amount of working capital?
An adequate amount of working capital is needed within a firm so that everyday expenses can be taken care of. Electric bills, payroll, and rental payments have to be paid to keep a firm in business.
What factors a financial manager consider while estimating working capital requirements of a firm?
There are many factors that a financial manager will consider while estimating working capital requirements of a firm. The main factors will include the availability of resources and the returns it will bring to the firm.
What are the different methods of estimating working capital requirement of a firm?
There are two main methods of estimating working capital within a firm. These include the conventional method which measures cash flow, and the concept of operating cycle.
How does an increase in revenue affect working capital?
Revenue affects the capital by decreasing the capital.
What is temporary and permanent working capital?
Permanent working capital is the minimum investment in the form of inventory of raw materials, work-in-progress, finished goods, stores and book debs to facilitate uninterrupted operation in a firm. This minimum level is called the permanent or working capital.It is permanent like the firm's fixed assets are. Over and above this, the firm's working capital requirements fluctuate depending upon the cyclicality and seasonality of product demands. The is referred to as the variable or fluctuating or temporary working capital.
How should the working capital requirement of a firm be financed?
There are many ways of funding the working capital of a business: * Overdraft * Loan * Equity * Invoice discounting or factoring
What happens if a company over invests in net working capital?
If a firm over invest in net working capital, it incurs cost in the form of opportunity cost.
