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.
The working and fixed capital requirement of ˜S' Limited will be high due to the following reasons
(i) The business is capital intensive and the scale of operation is large.
(ii) Heavy investments are required for building up the production base and for technological upgradation.
(iii) In case of steel industry, the major input is iron ore and coal. The ratio of cost of raw material to total cost is very high. Hence, higher will be the need for working capital.
(iv) The longer the operating cycle, the larger is the amount of working capital required as the funds get locked up in the production process for a long period of time.
(v) Terms of credit for buying and selling goods, discount allowed by suppliers and to the customers also determines the quantum of working capital.
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?