WorkingCapitalManagementWord文档格式.docx

WorkingCapitalManagementWord文档格式.docx

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1.Calculateproduction/sellforaparticularperiode.g.weeklyormonthlyasthecasemaybe.

2.Peeperacostsheetfollowingaparticularactivityorcapacitylevel.Ifthereisachangeinthecapacitylevel,variablecostperunitdoesnotchangebutfixedcostperunitwillchange.

3.Valueofcurrentassetsorcurrentliability=Costperitemincludedintheitem*creditperiod*productionpertimeperiod.

4.Prepareaformalstatementofworkingcapital.

NOTE:

FollowingtheTandon&

ChoreCommitteerecommendationinIndiatheentrepreneurortheorganizationhastobring25%oftherequirementsofcurrentassetsoutoflongtermfinancing（i.e.capitalorreserveordebenture）.Thedifferenceofworkingcapitalthenwillbefinancedbythebank.ThisisknownasMPBF（MaximumPermissibleBankFinancing）.

Avarietyadvancedconceptsandtechniqueshavebeensuggestedformanagingdifferentfactsoftheworkingcapital.Thesehaveemanatedindifferentdisciplineslikeeconomics,operationsresearch,productionmanagement,statistics,andcomputersciences.

Acomprehensiveexpositionoftheseconceptsandtechniquesisbeyondthescopeofthisbook（aswellasthecompetenceoftheauthor）.However,whatisattemptedhereisadiscussionofsomeselectedtopicswhicharerelativemoreimportantfromthepracticalpointofview.

Atopicsincludedfordiscussioninthischapterare:

Workingcapitalleverage

Analysisofworkingcapitalcomponents

Cashbudgetsimulation

Cashmanagementmodels

Discriminantanalysisandcustomerclassification

Advancesininventorymanagement

WORKINGCAPITALLEVERAGE

Workingcapitalleveragereflectsthesensitivityofreturnoninvestment（earningpower）tochangesinthelevelofcurrentassets.Toexpresstheformulaforworkingcapitalleveragewewillusethefollowingsymbols:

CA=valueofcurrentassets（grossworkingcapital）

CA=changeinthelevelofcurrentassets

FA=valueofnetassets

TA=valueoftotalassets（TA=CA+FA）

EBIT=earningsbeforeinterestandtaxes

ROI=returnoninvestmentdefinedasEBIT/TA

Workingcapitalleverage（WCL）isequalto:

PercentagechangeinROI

PercentagechangeinCA

LetusconsiderthecasewherecurrentassetsreducebyCAwithoutinanywayimpairingtheearningscapacityofthefirm.ThepercentageincreaseinROIinthiscaseisequalto:

EBIT.-EBIT

TA-CATA.

EBIT

TA

Thisexpression,onsimplification,becomes:

CA.

TA-CA

Thepercentagedecreaseincurrentassetsissimply:

CA/CA

Hence,

WCL=CA.CA

TA-CACA

=CA.

TA-CA

Ifthereisanincreaseincurrentassets,ratherthanadecrease,

WCL=CA.

TA+CA

Illustration

Thefollowinginformationisavailablefortwocompanies,BoxLimitedandCoxLimited.

BoxLimitedCoxLimited

CurrentAssets（CA）Rs.150mlnRs.50mln

NetFixedAssets（FA）Rs.50mlnRs.150mln

TotalAssets（TA）Rs.200mlnRs.200mln

EarningsBeforeInterestandTaxes（EBIT）Rs.30mlnRs.30mln

ROI15%15%

Theworkingcapitalleverage,fora20percentreductionincurrentassets,isequalto:

WCL=CA.

TA–0.2CA

Forthetwocompanies,BoxLimitedandCoxLimited,theWCLvaluesareasfollows:

ECL（BoxLimited）=150.=0.88

200–30

ECL（BoxLimited）=50.=0.26

200–10

LookingattheWCLvaluesitisevidentthatthesensitivityofROItochangesinthelevelofCAisfargreaterforBoxLimitedthatforCoxLimited.

ANALYSISOFWORKINGCAPITALCOMPONENTS

Inordertounderstandthelengthoftimeforwhichresourcesarecommittedtovariouscomponentsofworkingcapital,operatingcycleanalysismaybedone.Anextensionofthisanalysiswhichmaybereferredastheweightedoperatingcycleanalysis,maybedonetothereflectthemagnitudesofresourcescommitments.Thissectiondiscussesthesetwokindsofanalysiswithillustrations.

OperatingCycleAnalysis

Theoperatingcycleofafirmbeginswiththeacquisitionofrawmaterialsandendswiththecollectionofreceivables.Therearefouraspectsoftheoperatingcyclewhichinvolvecommitmentofresources:

rawmaterialstage;

work-in-processstage;

finishedgoodsstage;

andaccountsreceivablestage.Thereisoneaspectoftheoperatingcyclewhichprovidesresources:

accountspayablestage（thisistheperiodforwhichcreditisprovidedbythesuppliersofrawmaterials.）

Thedurationoftheoperatingcyclemaybedefinedas

Doc=Drm+Dwip+Dfg+Dar–Dap

WhereDoc=durationoftheoperatingcycle

Drm=durationoftherawmaterialsandstoresstage

Dwip=durationofthework-in-processstage

Dfg=durationofthefinishedgoodsstage

Dar=durationoftheaccountsreceivablestage

Dap=durationoftheaccountspayablestage.

Awordaboutthecomponentsoftheoperatingcycleisinorder.

DurationoftheRawMaterialsandStoresStage:

Thisrepresentsthenumberofdaysforwhichrawmaterialsandstoresremainininventorybeforetheyareissuedforproduction.Itmaybecalculatedas:

Drm=Averagestockofrawmaterialsandstores.

Averagerawmaterialsandstoresconsumedperday

DurationoftheWork-in-ProcessStage:

Thisrepresentsthenumberofdaysrequiredinthework-in-progressstage.Itmaybemeasuredas:

Dwip=Averagework-in-progressinventory.

Averagework-in-progressvalueofrawmaterialscommittedperday

DurationoftheFinishedGoodsStage:

Thisreflectsthenumberofdaysforwhichfinishedgoodsremainininventorybeforetheyaresold.Itmaybecalculatedas:

Dfg=Averagefinishedgoodsinventory.

Averagecostofgoodssoldperday

DurationoftheaccountsReceivableStage:

Thisdenotesthenumberofdaysrequiredtocollecttheaccountsreceivable.Itmaybemeasuredas:

Dar=Averageaccountsreceivable

Averagesalesperday

DurationoftheAccountsPayablestage:

Thisrepresentsthenumberofdaysforwhichthesuppliersofrawmaterialsoffercredit.Itmaybecalculatedas:

Dap=Averageaccountspayable.

Averagecreditpurchasesperday

OperatingCycle:

AnIllustration

Thecalculationofoperatingcyclemaybeillustratedwiththehelpofanexample.

ThefollowinginformationisavailableforZenithLimited:

Averagestockofrawmaterialsandstores:

200

Averagework-in-progressinventory:

300

Averagefinishedgoodsinventory:

180

Averageaccountsreceivable:

Averageaccountspayable:

Averagerawmaterialsandstoresconsumedperday:

10

Averagework-in-progressvalueofrawmaterials

committedperday:

12.5

Averagecostofgoodssoldperday:

18

Averagesalesperday:

20

Onthebasisoftheaboveinformation,thedurationsofthevariouscomponentsoftheoperatingcyclearecalculatedasfollows:

Durationofrawmaterialsandstoresstage（Drm）=200=20days

10

Durationofwork-in-processstage（Dwip）=300=24days

12.5

Durationoffinishedgoodsstage（Dfg）=180=10days

18

Durationofaccountsreceivablestage（Dar）=300=15days

20

Durationofaccountspayablestage（Dap）=180=18days

10

Thedurationoftheoperatingcycle（Doc）is:

Doc=Drm+Dwip+Dfg+Dar–Dap=20+24+10+15–18=51days

WeightedOperatingCycleAnalysis

Theoperatingcycleanalysisfocusesonlyonthetimedimensionofinvestment.Itshowsthedurationsofvariouscomponentsoftheoperatingcycle.Thisanalysiscanbeextendedtotakeintoaccountdifferentialmagnitudesofinvestmentatdifferentstagesoftheoperatingcycle.Suchextendedanalysisleadstothecalculationofwhatmaybereferredtoastheweightedoperatingcyclewhichismoreusefulinworkingcapitalanalysis.

Theprocedureforcalculatingtheweightedoperatingcycleconsistsofthefollowingsteps:

Step1Calculatethedurationsofvariousstagesoftheoperatingcycle

Thedurationsofvariousstages,namely,

Drm（durationoftherawmaterialsandstoresstage）

Dwip（durationofthework-in-processstage）

Dfg（durationofthefinishedgoodsstage）

Dar（durationoftheaccountsreceivablestage）

Dap（durationoftheaccountspayablestage）

maybecalculatedusingtheformuladescribedintheprevioussection.

Step2Determinetheweightsforvariousstagesoftheoperatingcycle

Theweightsapplicabletovariousstagesoftheoperatingcyclereflecttheproportionsofthecostsincurreduptothatstageinrelationtothesellingpriceoftheproduct.

Hence,theweightsare:

StageWeight

RawmaterialsandstoresstageWm=Rawmaterialsandstorescostperunit

Salespriceperunit

Rawmaterialsandstorescostperunit

Work-in-processstageWwip=+0.5processingcostperunit

FinishedgoodsstageWfg=Costofgoodssoldperunit

AccountsreceivablestageW