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Amount of money available to finance the dayto-day operations. 2. Why does it become so important? As an indicator of financial problems Can maximize growth. Can help minimize future financial shortcomings. 3. Determining the amount of working capital needs. Current assets minus the current liabilities. The more that assets are in the form of cash, the lower the amount of liquid
Working capital
High WC due to poor delivery systems, poor accounting procedures, competition leading to longer credit periods. Constraints of internal and external funding Need of wc depends on stock, prdn.time, output, credit sales, delays, trading conventions, operating expenses Level of wc influenced by lack of internal resources , low productivity and diversion of funds to other uses.
Accounts Payable
Value Addition
Raw Materials
WIP
Cash
Finished Goods
Accounts Receivable
SALES
CASH FLOW
Many profitable firms round the globe fail because of lack of cash..
CASH FLOW
INCREASE IN CASH CASH DECREASE IN CASH
ACCOUNTS RECEIVABLE
ACCOUNTS PAYABLE
CASH SALES
INVENTORY
Cash Conserver
Investing Activities
Balance Sheet (fixed assets)
Financing Activities
Balance Sheet (non-current liabilities & Equity)
Cash Flows
Given Period Vertically Drawn Operating , investing ,financing Reconcialtion Of Open/Close Indirect Method For Cash Flows Signed Helps tracking liquidity
Financial Planning
Purpose of the Financial Plan Contents of the Financial Plan Steps in Financial Plan Development
Assess Financial Position Define Debt Policy Determine Asset Requirements Evaluate Financing Options Integrate into Management Control Structure
Pro Forma Cash flow statements : Ratio analysis and its interpretation Break Even Analysis
Current Liabilities & Provisions (D) Accounts Payable Short term bank borrowing Other current liabilities Provisions Long term Liabilities (E) Secured & Unsecured loan Shareholders equity (F) Ordinary share capital Preference share capital Reserves and Surplus TOTAL LIABLITY & EQUITY (D+E+F)