Assessment of Working Capital

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					Assessment of Working Capital
 Concept of Working Capital

• Gross Working Capital

• Net Working Capital
Factors influencing Working Capital
            Requirement
The following factors affect the working capital requirement:
•   Nature of industry
•   The operating cycle
•   The manufacturing cycle
•   Production policies
•   Shift in demand for products
•   Competitive conditions
•   Growth and expansion programs
•   Operating efficiency
•   Taxation
•   Dividend policy
•   Depreciation policy
•   Price level changes
•   Variation in supply of raw materials
 Purposes of Maintaining Working
              Capital
A manufacturing organization needs working
 capital for the following purposes:
  –   For purchase of raw materials,
  –   For purchase of stores and spares,
  –   For keeping funds blocked under stock in process,
  –   For keeping funds blocked in finished stocks,
Purposes of Maintaining Working
             Capital

– For keeping funds blocked in sundry debtors
  and receivables pending final realization of
  the bills,
– For making advance payments to their
  suppliers for ensuring continuous supply of
  raw materials, stores etc.
– For meeting day-to-day expenses like
  payment of wages, power bills etc.
       Bangladesh Bank Guideline for
   Assessing Working Capital Requirement
Name of Sub-sector: Textile Spinning Industry
Capacity Utilization
   a) Existing Unit            : 5% above last year’s actual capacity
                                 utilization subject to maximum of 90%.
   b) New Unit                 : 50% of sanctioned/rated capacity whichever is lower.

Inventory
   a) Imported Raw materials            :   90 days (cost at factory site)
   b) Local Raw Materials               :   30 days (cost at factory site)
   c)     Work-in-process               :   03 days (at production cost)
   d)     Finished Goods                :   10 days (at production cost)
   e)     Stores and Spares             :   90 days (cost at factory site)

3. Receivables                          : 15 days (at production cost)

4. Cash in hand                         : Cash requirements for other day to day
                                          expenditure (e.g. wages, transportation,
                                          postage, utilities, etc.) should be arranged
                                          by the sponsors.
     Bangladesh Bank Guideline for
 Assessing Working Capital Requirement
Name of Sub-sector: Electric Goods Industry

01. Capacity Utilization
    a) Existing Unit             : 5% above last year’s actual capacity
                                 utilization subject to maximum of 90%.
   b) New Unit                   : 50% of sanctioned/rated capacity
                                   whichever is lower.
02. Inventory
    a) Imported Raw materials                : 90 days (cost at factory site)
    b) Local Raw Materials       :   30 days (cost at factory site)
    c) Work-in-process           :   05 days (at production cost)
    d) Finished Goods            :   15 days (at production cost)
    e) Stores and Spares         :   90 days (cost at factory site)

03. Receivables                  : 15 days (at production cost)

04. Cash in hand                 : Cash requirements for other day to day
                                            expenditure (e.g. wages,
   transportation,                                    postage, utilities, etc.)
   should be arranged by                                         the sponsors.

				
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posted:8/19/2012
language:English
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