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INTRODUCTION
OBJECTIVES
To minimize the amount of capital employed in financing current assets.
Fixed Capital and Working Capital differ in Discounting and compounding not important
Increases liquidity although affects profitability
Can be adjusted with sales fluctuations in the short run
ADVANTAGES
The working capital management is created a feeling of security and confidence in the management. By making cash purchase cash discount can be claimed.
It increases goodwill and debt capacity of the business. It will make easy to obtain bank loan from banks.
Operating Cycle:
The time duration required to convert sales, after the conversion of resources into inventories, into cash.
(a) Minimum level of current assets continuously required for carrying on business operations Fluctuating Working Capital:
(a) Extra capital needed to support changing production and sales activities
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Pressure on existing cash Exceptional cash generating activities e.g. offering high discounts for cash payment Bank overdraft exceeds authorized limit
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Production Policy
Contd
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Contd
Availability of credit
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