Comments on: Working Capital Loan – Money Power to Propel your Business!

By: Matt

Matt — Sat, 09 Jan 2010 17:39:30 +0000

Capital can come from individuals or firms specializing in venture capital funding. In either case you will be required to demonstrate that your business can become profitable (return on investment) in the foreseeable future. If you can answer the following questions with a yes, you will not have difficulty raising funds.

1) Is your customer base expanding?
2) Is your competition decreasing?
3) Is your reputation for quality and service better than that of your local competitors?
4) Are your operating costs under control?
5)You have not been in business long enough to have audtable records. How will you prove your revenue flow and costs.

GOOD LUCK

By: K

Sat, 09 Jan 2010 13:14:17 +0000

Calculate the working capital for the historical periods – then that will tell you the average and peak working capital requirements for the business

By: psychic

psychic — Fri, 08 Jan 2010 00:41:19 +0000

it’s great and easy lerning.. thanks for uploading!

By: Bridgette

Bridgette — Thu, 07 Jan 2010 23:43:26 +0000

Let's assume it reduces inventory levels by 25 000 each year. Changes in net working capital should be included in cash flow projections so if this is plugged into ur calc, then ur npv should decrease by 74,361.78

By: Luckystar65

Luckystar65 — Thu, 07 Jan 2010 19:31:36 +0000

bankruptcy or now a bail out is an option

By: MR. X

MR. X — Thu, 07 Jan 2010 14:36:44 +0000

You can calculate the first year working capital by using some balance sheet numbers. Net WC = current assets – current liabilities, so if you are looking at it in a finance perspective for a DCF,
Net WC = accts rec + inventories – accts payable

Once you have this number you can use the estimated WC for the next projected years in your DCF to find the change in WC.

By: Ronald R

Ronald R — Thu, 07 Jan 2010 10:26:56 +0000

Working capital is defined as current assets minus current liabilities. Cash is part of current assets. Current assets are those assets that are expected to be liquidated within a year. So if working capital is increased, more current assets, including more cash, than current current liabilities, the company becomes for liquid.

Return on invested capital is more complicated and there are several ways to calculate it. One way is Net Operating Profit after Taxes divided by Total Assets – Cash – Current Liabilities. Or return on invested capital = net operating profit after taxes divided by working capital minus fixed assets. So an increase in working capital, and therefore liquidity, could decrease ROIC.

By: Nirvana

Nirvana — Wed, 06 Jan 2010 21:19:20 +0000

DR Cash and Cash from bank finance , will be Working Capital
CR Owner equity and A/P to bank finance
will be your liability

By: jsphlamba

jsphlamba — Wed, 06 Jan 2010 07:35:37 +0000

Aside from fixtures, fixed expenses and descretionary expenditures, the next important consideration is inventory.

With planned sales as a starting point, one must determine these things.
Beginning Inventory
Sales plan
Ending inventory
Deliveries.

Once delivery time is known, then have enough beginning goods on hand to support those sales until the next delivery.
One must plan an ending inventory to support sales in the event of late deliveries. You can't plan on zero with no inventory.

Thus:
Ending Inventory…plus Planned sales….less Inventory On Hand=Open to Buy. This can be the first purchases for a new opening, to be delivered pre-opening.

This holds true throughout any period, always taking into consideration delivery time, planned sales for the period and inventory on hand.

In some cases, Assortment will determine the initial amount of inventory needed.

All these things on a plan for 6 months or longer, will result in TO. Turnover. Meaning how many times in a given period that inventory turns.
Again, depending on delivery time, TO can be as often as 12 or more times in a year, or as low as 3-4 times per year.

This formula is the Sum of the first month beginning inventory plus each succeeding month Beginning inventory plus last month Ending inventory.
For a 6 month period you would have the sum of 7 inventories. For 12 months, 13.
Average that by dividing by 7 or 13, then divide the net sales by that average = TO.
A good plan will prevent overstocking, resulting in less old goods and reduced markdowns. It must be flexible, adjusting for an increase or a decrease in sales.
It must also be controlled on a seasonal basis for changes throughout the year.
There are peaks and valleys that must be planned, with more or less inventory.

TO allows the Capital Investment to support itself without additional capital and produce maximum sales and profits.

If interested, these are Excel templates for business analysis.
http://www.score.org/template_gallery.html

By: guzen

guzen — Wed, 06 Jan 2010 07:29:21 +0000

GREAT VIDEO VERY INFORMATIVE