What are working capital sources and working capital management?
Working capital is the operating capital of a business which is used in its day-to-day operations, calculated as the current assets minus the current liabilities. The positive working capital commonly indicates that a company can pay off its short-term liabilities almost immediately. Sources of working capital are Share Capital, retained profits, debentures, long-term loans, and…
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Emerging Role of the Financial Manager in India
A financial manager plays a pivotal role in overseeing the financial health of an organization. Their responsibilities encompass a wide array of tasks aimed at ensuring the efficient utilization of funds while maintaining long-term financial stability. This article explores the key roles and responsibilities of financial managers in India. Key Responsibilities of a Financial Manager…
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The difference between Reserves and Provisions explained
Both reserves and provisions refer to the amount retained by an organization to deal with all possible contingencies in the future. In accounting parlance, reserves are appropriations out of profits and provisions are charges against profits. Although the IFRS Standards sometimes call provisions a ‘reserve’, they are not the same thing – a provision is…
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What is a common size balance sheet?
A common size financial statement is an income statement or balance sheet in which all items are expressed as percentages of a common base figure rather than as absolute numerical figures. For example, in a common-size income statement you will find the income and expenditure amounts as percentage of net sales. Similarly, a common size…
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Relationship of Finance to Economics and Accounting
Finance, economics, and accounting are deeply interconnected disciplines that influence one another. A thorough understanding of any one of these fields often necessitates at least a foundational grasp of the other two. Core Definitions Finance: The study of how to allocate assets optimally, focusing on the future value of assets. Finance is fundamentally forward-looking. Economics:…
Method of Calculating length of holding period for stocks and receivables
(A manufacturing unit needs to hold the stock of raw material, work-in-process, finished goods for a length of time in the workplace before dispatching the final products to the customers. This article explains how to calculate holding period for stocks and book debts collection) The working capital cycle (WCC) is the time it takes for…
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