Discuss about working capital affecting both the liquidity as well as profitability of a business.
The working capital should neither be more nor less than ; required. Both these situations are harmful. If the amount of working capital
is more than required, it will no doubt increase liquidity but decrease profitability. For instance, if large amount of cash is kept as working capital, i then this excessive cash will remain idle and cause the profitability to fall.
On the contrary, if the amount of cash and other current assets are very ‘ little, then lot of difficulties will have to be faced in meeting daily expenses
and making payment to the creditors. Thus, optimum amount of both current assets and current liabilities should be determined so that profitability of the business remains intact and there is no fall in liquidity.
Explain the importance of having a financial plan for this company. Give an imaginary plan to support your answer.
Discuss about working capital affecting both the liquidity as well as profitability of a business.
‘S’ Limited is manqufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7%-8% and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand it is facing. It is estimated that it will require about ? 5,000 crores to set up and about t 500 crores of working capital to start the new plant.
What is the role and objectives of financial management for this company?
Capital structure decision is essentially optimisation of risk-return relationship. Comment.
Keeping in mind that it is a highly capital intensive sector what factors will affect the fixed and working capital. Give reasons with regard to both in support of your answer.
What is meant by working capital? How is it calculated?
Discuss five important determinants of working capital requirements.
A capital budgeting decision is capable of changing the financial fortune of a business. Do you agree? Why or why not?
Explain the term ‘trading on equity’. Why, when and how it can used by a business organisation?