Working capital as a percentage of total assets, Financial Management

Assignment Help:

Q. Working Capital as a Percentage of Total Assets?

This approach of estimation of working capital requirement is based on the fact that the total assets of the firm arc consisting of fixed assets and current assets. On the basis of past experience, a relationship between

i) total current assets Le., gross working capital; or net working capital, Le., Current assets Current liabilities, and

ii) Total fixed assets or total assets of the firm are established. For example, a firm is maintaining 20% of its total assets in the form of current assets and expects to have total assets of Rs. 50, 00,000 next year. Thus, the current assets of the firm would be Rs. 1000000 (i.e., 20% of Rs. 5000000). .

In this approach, the working capital may also be estimated as a% of fixed assets. The firm basically plans the future level of fixed assets in terms of capital budgeting decisions. In order to use these fixed assets in an efficient and optimal way, the firm must have sufficient working capi¬tal. So, the working capital requirement depends upon the planned level of fixed assets.


Related Discussions:- Working capital as a percentage of total assets

Aeromag, Our geologist, Rebecca Paulka, has estimated from the earlier expl...

Our geologist, Rebecca Paulka, has estimated from the earlier exploration that the Malian prospects have a 30% likelihood of containing economic quantities of uranium ore, the Nige

Explain the term credit unions, Credit unions Credit unions are non-pro...

Credit unions Credit unions are non-profit institutions jointly organised and owned by their members (depositors). Their main objective is to satisfy the depository and lending

Foreign exchange rates, Foreign Exchange Rates The proportional va...

Foreign Exchange Rates The proportional value of one currency to other, used to exchange currency from one denomination to another.  For example, one British pound is wort

Un number, 1. UN Number is a four digit number assigned to a potentially ha...

1. UN Number is a four digit number assigned to a potentially hazardous material (such as gasoline) or class of materials like corrosive liquids. 2. UN Numbers are assigned by U

State the goal of shareholders wealth maximisation, Goal of Shareholders we...

Goal of Shareholders wealth maximisation Shareholders' wealth maximisation goal gives us the best results since effectsof all the decisions taken by company and its managers ar

Interest rate parity, QUESTION 1 (a) What are the differences between f...

QUESTION 1 (a) What are the differences between futures and forwards? (b) Clearly explain the following position on options i) Going long on a call option ii) Going lo

Prepare a statement of financial position, Brown has been in business for s...

Brown has been in business for some years and has kept her drawings slightly below the level of profits each year. You are her accountant, and she has passed you the following list

Calculate the quality spread differential, Alpha and Beta Companies can bor...

Alpha and Beta Companies can borrow at the subsequent rates.                                                            Alpha               Beta Moody's credit rating

Above the line deduction, Above the line deductions are certain kinds of de...

Above the line deductions are certain kinds of deductions that are deducted from your income before the adjusted gross income is computed for tax purposes. Above the line deduct

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd