Determinants of Working Capital

The level of working capital requirements of a company is determined by the following factors 1) Nature of Business: The nature of a company’s business is the prime determinant of its working capital requirements. Businesses of small size, especially those engaged in trading of goods, need a high level of working capital to fulfill their … Read more

Motives for Holding Cash

Motives for Holding Cash

Motives for Holding Cash. One of the most important constituents of current assets is “cash.” It is required to carry out all the activities of the business. A business should have enough cash on hand to pay its bills right now and in the future. Cash, being totally unproductive by nature, should be kept at … Read more

Investing Surplus Cash

Participants in the Indian Money Market.

Investing Surplus Cash. Surplus cash that is not required in the short run should be invested in liquid assets, Le.. marketable securities, or other securities that can be instantly converted into cash when required. Cash itself is an unproductive asset, and keeping it in the same form will not benefit the firm. Rather, it has … Read more

Controlling Cash Outflows

Participants in the Indian Money Market.

Controlling cash outflows. Just as the basic rule for increasing cash inflows is to increase collection speed, the basic rule for decreasing cash outflows is to slow down the payment process. For this, a centralized payment system may be adopted, just as a decentralized collection system was adopted in the case of receivables. A reasonable … Read more

Factors Affecting Investment in Receivables

Factors Affecting Investment in Receivables the Size of Eowing are some of the factors that directly or indirectly affect the size of the receivables: 1) Size of Credit Sales: The major factor affecting the size of the receivable is the volume of the credit sales. Receivables have a direct relation to the credit sales. As … Read more

Types of Risks Associated with Receivables

Types of Risks Associated with Receivables. The risk related to receivables are: 1) Supplier Fraud Risk: The supplier fraud risk is the risk which the supplier may present the fake or duplicated pay order or invoice to the lender for financing. 2) Receivable Title Risk: The risk which the supplier has previously allocated or guarantee … Read more

Types of Inventories

Types of inventories

Types of Inventories. Inventory denotes “stock of goods”. Various authors have defined this word in their own way. In terms of accounting, the word may be used to refer to the stock of finished goods only, while in a manufacturing concern this may include work in process, stores, raw materials, etc. The following are the … Read more

Inventory’s meaning and nature.

inventory's meaning and nature

Inventory’s meaning and nature. Inventory denotes “stock of goods”. Various authors have defined this word in their own way. In terms of accounting, the word may be used to refer to the stock of finished goods only, while in a manufacturing concern this may include work in process, stores, raw materials, etc. International Accounting Standard … Read more