What are the working capital strategies?

4 Tips for Effective Working Capital Management

  • Reduce inventory and increase inventory turnover.
  • Pay vendors on time and manage debtors effectively.
  • Convert to electronic payables and receivables.
  • Receive adequate financing.
  • Grow your business with well-managed working capital.

What are the 3 approaches to working capital management?

There are basically three approaches to financing working capital. These are: the Hedging approach, the Conservative approach and the Aggressive approach.

What is working capital trade-off?

Trade working capital is the difference between current assets and current liabilities directly associated with everyday business operations.

What are the two major components of a working capital management strategy?

The two major components of Working Capital are Current Assets and Current Liabilities. One of the major aspects of an effective working capital management is to have regular analysis of the company’s currents assets and liabilities.

Which of the following working capital strategies is the most aggressive?

Answer» c. Making greater use of short term finance and minimizing net short term asset.

What are the factors affecting working capital?

Factors Affecting the Working Capital:

  • Length of Operating Cycle: The amount of working capital directly depends upon the length of operating cycle.
  • Nature of Business:
  • Scale of Operation:
  • Business Cycle Fluctuation:
  • Seasonal Factors:
  • Technology and Production Cycle:
  • Credit Allowed:
  • Credit Avail:

How can working capital be improved?

Working Capital Improvement Techniques

  1. Shorten Operating Cycles. An increased cash flow generates working capital.
  2. Avoid Financing Fixed Assets with Working Capital.
  3. Perform Credit Checks on New Customers.
  4. Utilize Trade Credit Insurance.
  5. Cut Unnecessary Expenses.
  6. Reduce Bad Debt.
  7. Find Additional Bank Finance.

How trade-off is possible between return and risk?

The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns.

How can trade capital be improved?

What are four general phases of the working capital cycle?

The four general phases of the working capital cycle include: obtaining cash, turning cash into resources, using the resources to provide services and then billing customers for the services provided (Zelman, McCue & Glick, 2009).