Page 130 - Corporate Finance PDF Final new link

NPP

130 Corporate Finance BRILLIANT’S

If there is a sudden increase in demand, `{X {S>_m§S _| AMmZH$ d¥{Õ hmo Vmo àmoS>ŠeZ H$s
the cost of production will be higher, similarly H$m°ñQ> A{YH$ hmoJr& Bgr àH$ma {ZåZ {S>_m§S> Ho$ Xm¡amZ
during low demand also the production will ^r CËnmXZ _h±Jm n‹S>oJm Š`m|{H$ V~ n`m©á H$m`© Ho$ {~Zm
be expensive because it is required to maintain
labour force without adequate work. ^r bo~a \$mog© H$mo aIZm n‹S> ahm h¡&
Therefore, a firm should try to maintain a AV… EH$ \$_© H$mo XmoZm| n[apñW{V`m| _| CËnmXZ H$m
particular level of production in both EH$ {ZpíMV ñVa ~ZmE aIZm n‹S>Vm h¡& _§Xr Ho$ grOZ _|
situations. During slack season, funds will be
required to maintain the level of production. CËnmXZ H$m ñVa ~ZmE aIZo Ho$ {bE \$ÊS> H$s Amdí`H$Vm
So financial arrangement must be made in hmoJr& AV… \$m`ZoÝg H$s ì`dñWm nhbo go H$a boZm Mm{hE&
advance.
4. Credit policy of the firm: The credit 4. \$_© H$s H«o${S>Q> nm°{cgr… \$_© H$s H«o${S>Q> nm°{cgr
policy of the firm also affects the working ^r d{Hª$J H¡${nQ>c H$s Amdí`H$Vm H$mo à^m{dV H$aVr h¡&
capital requirements. Normally the credit
facility is given according to the standard rules gm_mÝ`V… H«o${S>Q> H$s gw{dYm CÚmoJ Ho$ _mZH$ {Z`_m| Ho$
of that particular industry. A firm should be AZwgma Xr OmVr h¡& \$_© H$mo AnZo J«mhH$m| H$mo H«o${S>Q> XoZo _|
very careful in granting credit to its customers. H$m\$s gmdYmZr aIZm Mm{hE& `{X \$_© Zo CXma H«o${S>Q>
If the firm has followed a liberal credit policy
nm°{cgr AnZm aIr h¡ Am¡a J«mhH$ H$s H«o${S>Q> XoZo g§~§Yr
without giving proper attention to the
creditworthiness of the customers, it will be pñW{V H$mo Ü`mZ _| Zht aIm h¡ Vmo `h \$_© Ho$ {bE KmVH$
fatal for the firm. The firm should be very hmo gH$Vm h¡& \$_© H$mo n¡gm dgybZo _| erK«Vm H$aZm Mm{hE&
prompt in collection. If the average collection `{X H$coŠeZ H$s Am¡gV Ad{Y ~hþV A{YH$ h¡ Vmo Bggo
period is too much, it will increase the chances
of bad debts. ~¡S> S>oãQ> ~‹T>Zo H$s g§^mdZm A{YH$ hmo OmVr h¡&
It is necessary to follow a rational credit Eogr {Zînj H«o${S>Q> nm°{cgr AnZmZm Amdí`H$ h¡ Omo
policy which should be based on credit standing J«mhH$ H$s pñW{V Ho$ AZwê$n hmo& ZE J«mhH$m| H$s H«o${S>Q> H$s
of the customers. The credit worthiness of the `mo½`Vm g_`-g_` na naIr OmZr Mm{hE Am¡a `{X H$moB©
new customers should be periodically checked
and if there is any customer who has delayed in Eogm J«mhH$ h¡ Omo g_` na ^wJVmZ Zht H$a ahm h¡ Vmo Cg
payment, action should be taken immediately. na Vwa§V H$m`©dmhr H$aZm Mm{hE&
5. Manufacturing Cycle: Manufacturing 5. _¡Ý`y\o$ŠM[a¨J gm`H$b: _¡Ý`y\o$ŠM[a¨J gm`H$b
cycle starts from purchase of raw material and H$m Amaå^ H$ÀMo _mb H$s IarXr Ho$ gmW àmaå^ hmoVm h¡
ends with production of finished goods. If the Am¡a V¡`ma _mb Ho$ CËnmXZ na IË_ hmoVm h¡& `{X
manufacturing cycle is longer, the working
capital requirement will be large. It is also _¡Ý`y\o$ŠM[a¨J gm`H$b bå~r h¡ Vmo d{Hª$J H¡${nQ>c H$s
required that manufacturing cycle should be Amdí`H$Vm A{YH$ hmoJr& `h ^r Amdí`H$ h¡ {H$
completed within specified time period. If there _¡Ý`y\o$ŠM[a¨J gm`H$b {ZpíMV g_`md{Y _| nyU© hmoZm Mm{hE&
is any delay in the process, the work-in- `{X Bg àmogog _| H$moB© {dbå~ hmoVm h¡ Vmo dH©$-BZ-àmoJ«og
progress will accumulate and there will be
wastage of time. In order to reduce working BH$Æ>m hmo OmEJm Am¡a Bg_| g_` Iam~ hmoJm& d{Hª$J
capital needs, some manufacturers take H¡${nQ>c H$s Amdí`H$Vm H$_ H$aZo Ho$ {bE Hw$N> {Z_m©Vm
advance payment from their customers. AnZo J«mhH$m| go ES>dm§g no_|Q> àmá H$a boVo h¢&