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PROJECTION OF WORKING CAPITAL REQUIREMENTS:

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Sunanda K. Chavan
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PROJECTION OF WORKING CAPITAL REQUIREMENTS: - September 13th, 2010

PROJECTION OF WORKING CAPITAL REQUIREMENTS:

 DETERMINED LEVEL OF ACTIVITY

 ESTIMATE RAW MATERIAL COST

 ESTIMSTE LABOUR & OVERHEADS COST

 WORK-IN- PROGESS PERIOD

 FINISHING GOODS PERIOD

 SUNDRY DEBTORS PEIOD

 CASH/BANK BALANCE

 SUNDRY CREDITORS

 CREADITORS FOR EXPENSES

 SAFETY MARGIN
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Business Education
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Re: PROJECTION OF WORKING CAPITAL REQUIREMENTS: - June 30th, 2015

How to Calculate Working Capital

Working capital Formula

Working Capital = Current Assets/Current liabilities

Example

Since the working capital ratio has two main moving parts, assets and liabilities, it is important to think about how they work together. In other words, how does the ratio change if a firm's current liabilities increase while the current assets stay the same? Here are the four examples of changes that affect the ratio:

Current assets increase = increase in WCR
Current assets decrease= decrease in WCR
Current liabilities increase = decrease in WCR
Current liabilities decrease = increase in WCR
Let's take a look at an example. Kay's Machine Shop has several loans from banks for equipment she purchased in the last five years. All of these loans are coming due which is decreasing her working capital. At the end of the year, Kay had $100,000 of current assets and $125,000 of current liabilities. Here is her WCR:


Working Capital Ratio Formula

Working Capital = Current Assets/Current liabilities

As you can see, Kay's WCR is less than 1 because her debt is increasing. This makes her business more risky to new potential credits. If Kay wants to apply for another loan, she should pay off some of the liabilities to lower her working capital ratio before she applies.
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Rose Marry
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Re: PROJECTION OF WORKING CAPITAL REQUIREMENTS: - April 21st, 2016

Quote:
Originally Posted by sunandaC View Post
PROJECTION OF WORKING CAPITAL REQUIREMENTS:

 DETERMINED LEVEL OF ACTIVITY

 ESTIMATE RAW MATERIAL COST

 ESTIMSTE LABOUR & OVERHEADS COST

 WORK-IN- PROGESS PERIOD

 FINISHING GOODS PERIOD

 SUNDRY DEBTORS PEIOD

 CASH/BANK BALANCE

 SUNDRY CREDITORS

 CREADITORS FOR EXPENSES

 SAFETY MARGIN
Hello friend,

Here I am up-loading Study Notes on Working Capital Management, please check attachment below.
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File Type: pdf Study Notes on Working Capital Management.pdf (354.2 KB, 1 views)
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