Found 1015 Articles for Finance Management

The major differences between Temporary and Permanent working capital are as follows −Based on NeedsTemporary and permanent working capital differ in terms of their need. The permanent working capital is a fixed amount of working capital that is kept fixed for the long-term needs of the business. The temporary working capital, on the other hand, is meant for day-to-day, short-term expenses.Temporary working capital is an additional amount of capital kept reserved above the permanent working capital. Therefore, permanent working capital is a large amount of capital while temporary capital is a smaller amount of capital.Based on UsageTemporary working capital is ... Read More

The operating cycle is the time required for converting sales into cash after converting resources into inventories. The operating cycle of a manufacturing firm is different from non-manufacturing companies because manufacturing companies need to resource raw materials and convert them into finished goods. While non-manufacturing companies can go directly from the acquisition of services or products to sales, manufacturing companies need to consider the time required for manufacturing the goods. So, generally, the operating cycle of a company is more prolonged than non-manufacturing companies.The operating cycle of a manufacturing company is made up of three phases −Acquisition of Raw materials ... Read More

What is Sustainable Growth?Sustainable growth is a percentage measure of yearly growth in sales that is in sync with the firm’s financial policies meaning no fresh equity is issued. For a multiproduct company, sustainable growth can be calculated by the company’s growth at the corporate level in terms of growth of assets. Usually, companies set their target growth in terms of sales. To grow sales, the company needs to invest funds in assets. This investment can either be sourced from external sources or provided by the internal resources of a company.Therefore, the assets of a company will grow by an ... Read More

An operating cycle is the time needed to convert sales into cash after converting the resources into inventories. In fact, no company generates sales after the production of a good instantly. It has to wait for some time to sell the goods in the market after purchasing raw materials and other necessary items and producing the finished goods.An operating cycle is divided into two types as follows −Gross Operating Cycle (GOC).Net Operating Cycle (NOC).Here’s more about GOC and NOC and their differences.Gross Operating CycleThe gross operating cycle of a firm can be expressed as the Inventory conversion period (ICP) plus ... Read More

What is Operating Cycle?All companies need working capital to run its day-to-day activities. There is no business that does not need working capital. In order to reach its financial goals, however, different companies need different amounts of working capital. An operating cycle is the time needed to convert sales into cash after converting the resources into inventories. In fact, no company generates sales after the production of a good instantly. It has to wait for some time to sell the goods in the market after purchasing raw materials and other necessary items and producing the finished goods.To understand about operating ... Read More

Definition: Net Concept of Working CapitalThe net concept of working capital is a qualitative concept that focuses on the liquidity of funds that must be maintained in order to meet short-term liabilities. It is obvious that a company would need enough funds to meet the day-to-day needs of its operation, so that it can survive and meet its long-term goals. The net concept of working capital management should be applied to organizations individually as there is no precise measure to which the net concept of working capital management should be applied to a company.Like the gross concept of working capital ... Read More

There are mainly two types of working capital–gross working capital and net working capital. Although many people tend to use the two alternatively, there are some stark differences between the concepts of working capital. Therefore, it is important to know the differences so that no confusion arises while considering the two concepts of working capital.Following are the differences between Gross Working Capital and Net Working Capital −Investment in current assets vs. liabilities to be paidGross working capital is the investment of a company in its current assets. Current assets are the items that can be converted to cash within a ... Read More

To measure a company’s success is to measure the growth of the company. There are a host of manners in which a company’s growth potential can be assessed.Assessment of Company’s Growth PotentialFollowing methods are the most significant ones to calculate the growth potential of a company −Revenues and EarningsRevenues and earnings that are obtained via sales are good indicators of a company’s growth potential. The money that a company makes via sales is a factor that determines whether the company is strong and if so how much its potential to grow.The money left after paying for all expenditures is the ... Read More

What is Sustainable Growth?The sustainable growth of a company is the growth that it achieves without having to finance its projects externally. In other words, the sustainable growth rate is the maximum rate of growth a company can achieve with its own funds.For example, a company may use retained earnings for furthering its expansion or increasing output. Such growth would not need external support. Such growth in finance is known as sustainable growth.The Sustainable Growth Rate (SGR) of a company shows how well it manages its day-to-day activities, such as paying the bills and getting paid for its goods and ... Read More

What is Sustainable Growth?The main aim of financial planning is to get a balanced relationship between financial goals. It is based on the sustainable growth of a company given its established financial policies. As it is known, financial planning involves growth, investment, and financing. Therefore, to achieve sustainable growth, the firms need to create policies that augment the growth potential of a company to sustain in a long-term period.Sustainable growth is a percentage measure of yearly growth in sales that is in sync with the company’s financial policies meaning no fresh equity is issued.The following relationship may be used to ... Read More