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140 Corporate Finance BRILLIANT’S

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Amount of Working Capital (` Permanent
Temporary or
Fluctuating

Permanent and Temporary Working Capital
Fig.: Permanent and Temporary Working Capital
How to Solve Practical Problems of d{Hª$J H¡${nQ>b H$s Amdí`H$Vm H$m {ZYm©aU H$aZo
Estimating Working Capital Re- go g§~§{YV à¡pŠQ>H$b àm°ãbåg H$mo H¡$go hc H$a|?
quirements?
In order to avoid the shortage of working d{Hª$J H¡${nQ>c H$s em°Q>}O H$s pñW{V {Z{_©V Z hmo
capital at once, an estimate of working capital BgHo$ {cE d{Hª$J H¡${nQ>c H$s Amdí`H$Vm H$m AZw_mZ
requirements should be made in advance so
that arrangements can be made to procure nhco go hr cJm coZm Amdí`H$ h¡ Vm{H$ Amdí`H$Vm
adequate working capital. But estimation of Ho$ g_` d{Hª$J H¡${nQ>c H$s ì`dñWm H$s Om gHo$Ÿ& {H$ÝVw
working capital requirements is not an easy d{Hª$J H¡${nQ>c H$s Amdí`H$Vm H$m {ZYm©aU H$aZm gac
task and a number of factors have to be
considered before starting this estimate. For H$m`© Zht h¡ Š`m|{H$ BgHo$ {cE H$B© \¡$ŠQ>g© H$mo Ü`mZ
a manufacturing organization, the following _| aIZm n‹S>Vm h¡Ÿ& EH$ _¡Ý`w\¡$ŠM[a¨J Am°J}ZmBOoeZ H$mo
factors have to be taken into consideration AnZr d{Hª$J H¡${nQ>c {ZYm©[aV H$aVo g_` {ZåZ{c{IV
while making an estimate of working capital
requirements: \¡$ŠQ>g© H$mo Ü`mZ _| aIZm hmoVm h¡:
1. Total cost incurred on material, wages and 1. _Q>o[a`c, _OXyar Ed§ AmodahoS²>g H$s Q>moQ>b H$m°ñQ>Ÿ&
overheads.
2. The time for which raw materials are to 2. àmoS>ŠeZ Ho$ {cE Bí`y H$aZo Ho$ nyd© am° _Q>o[a`c
remain in stores before they are issued for {H$VZo g_` VH$ ñQ>moa _| ahoJmŸ&
production.
3. The length of the production cycle or work- 3. àmoS>ŠeZ gm`H$c `m dH©$-BZ-àmogog H$s Ad{Y
in-process i.e. the time taken for conversion AWm©V² am° _Q>o[a`c H$mo {\${ZíS> JwS²>g _| n[ad{V©V
of raw material into finished goods. H$aZo H$s Ad{YŸ&

4. The length of sales cycle during which fin- 4. goëg gm`H$c H$s Ad{Y {Og_| {\${ZíS> JwS²>g Ho$
ished goods are to be kept waiting for sales. {dH«$` Ho$ {cE doqQ>J _| aIZm &

5. The average period of credit allowed to 5. H$ñQ>_g© H$mo Xr OmZo dmcr H«o${S>Q> H$s Am¡gV
customers. Ad{YŸ&
6. Cash required to pay day-to-day expenses 6. {~OZog Ho$ {XZ-à{V{XZ Ho$ ì``m| Ho$ {cE Amdí`H$
of the business. H¡$eŸ&