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  • Principles of Working Capital Management

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    Abhijit Sharma
    47 просмотров6 страниц
    Here are some key modifications I would suggest to RTL's financial plan to improve working capital management: 1. Reduce inventory levels through better demand forecasting and lean production techniques. RTL's inventory conversion period is too high. 2. Tighten credit terms with customers to speed up collection of receivables. While this may hurt sales initially, it will improve cash flow. 3. Negotiate better payment terms with suppliers to extend the creditor deferral period. This will improve working capital efficiency. 4. Pursue factoring or invoice discounting facilities to convert receivables to cash faster without increasing debt. 5. Consider supply chain financing programs where suppliers get paid early at a

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    Here are some key modifications I would suggest to RTL's financial plan to improve working capital management: 1. Reduce inventory levels through better demand forecasting and lean production techniques. RTL's inventory conversion period is too high. 2. Tighten credit terms with customers to speed up collection of receivables. While this may hurt sales initially, it will improve cash flow. 3. Negotiate better payment terms with suppliers to extend the creditor deferral period. This will improve working capital efficiency. 4. Pursue factoring or invoice discounting facilities to convert receivables to cash faster without increasing debt. 5. Consider supply chain financing programs where suppliers get paid early at a

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    47 просмотров6 страниц

    Principles of Working Capital Management

    Загружено:

    Abhijit Sharma
    Here are some key modifications I would suggest to RTL's financial plan to improve working capital management: 1. Reduce inventory levels through better demand forecasting and lean production techniques. RTL's inventory conversion period is too high. 2. Tighten credit terms with customers to speed up collection of receivables. While this may hurt sales initially, it will improve cash flow. 3. Negotiate better payment terms with suppliers to extend the creditor deferral period. This will improve working capital efficiency. 4. Pursue factoring or invoice discounting facilities to convert receivables to cash faster without increasing debt. 5. Consider supply chain financing programs where suppliers get paid early at a

    Авторское право:

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    Скачайте в формате PPT, PDF, TXT или читайте онлайн в Scribd
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    из 6

    PRINCIPLES OF

    WORKING
    CAPITAL
    MANAGEMENT
    CASE OF RELIABLE TEXAMILL LIMITED
    Q.1-CRITICALLY EVALUATE
    RTL’S PERFORMANCE AND
    FINANCING OF ITS
    OPERATION?

    • TABLE
    • Profitability ratio:-The profitability ratios are calculated to
    measure the operating efficiency of the company, creditors &
    Owners are also interested in Profitability of the firm. Here the
    profitability ratios show a slightly increasing trend, which is
    although not good but better than the losses.
    • Leverage Ratio:-To judge the long term financial position.
     To measure the financial risk and the firm’s ability of using debt
    for the benefit of shareholders.
     There should be an ‘appropriate mix’ of debt and owner’s
    equity in financing the firm’s assets.
     The ratio shows an increasing trend.
    Q.2-HOW THE COMPANY
    MANAGED ITS WORKING
    CAPITAL IN THE PAST?
    ILLUSTRATE WITH
    APPROPRIATE CALCULATION?

    • Table
    • Liquidity ratio:-measure the ability of the firm to meet its current
    obligations. The failure of co. to meet its current obligations due to lack
    of sufficient liquidity, will result in :-
     Bad credit image
     Loss of Creditor’s confidence
     Litigations resulting in the closure of the company.
    A very high degree of liquidity is also bad, idle assets earn nothing.
    The overall liquidity ratios have declined from those in 2007 to those in 2009
    Q-3-WHAT ARE RTL’S PLANS TO
    IMPROVE ITS WORKING CAPITAL
    MANAGEMENT? SHOW THE
    CALCULATION OF OPERATING
    CYCLE TO JUSTIFY YOUR ANSWER?

    • Table
    • Operating cycle:- Operating cycle is the time
    duration required to convert sales, after the
    conversion of resources into inventories, into
    cash.

    Operating cycle of a manufacturing firm


    OPERATING CYCLE
    CALCULATION

    2007 2008 2009


    1. ICP 119 163 111
    RMCP 85 78 60
    WIPCP 23 22 16
    FGCP 11 63 35
    2. DCP 136 105 58
    3. GOC 255 268 169
    4. CDP 105 92 15
    NOC 151 177 154
    Q.4-DO YOU ACCEPT FINANCIAL
    PLAN PREPARED BY RTL? WHAT
    MODIFICATIONS WOULD YOU
    SUGGEST IN THE PLAN AND
    WHY?

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