25 Things You Should Tell Your Best Friend Right Now

1. When we have plans to hang out, it gives me something to look forward to all week.

2. And when anything goes wrong, you’re the first person I think to call.

3. Because you always know exactly what I need to hear to feel better.

4. And you give me incredible advice because you usually know what I want better than I do.

5. All my best memories involve you.

6. Which is why 90% of our conversations start with “Remember that one time…” followed by something really dumb.

7. You’ve asked me some of the toughest questions I’ve ever been asked.

8. And I learn something from you every time we hang out.

9. I’m grateful to you for not judging me when I make awful decisions.

10. And for having my back when those decisions come back to haunt me.

11. You’re legitimately one of the smartest people I’ve ever met.

12. This is basically the scariest thought I ever have.

13. It’s awesome that I feel totally comfortable crying like a baby around you.

14. My parents and siblings consider you a part of the family.

15. This was the luckiest moment of my life:

16. (Although, let’s be real, it went more like this.)

17. Thank you for sharing cool things with me.

18. And for having more faith in me than I generally have in myself.

19. You’ve helped me face my fears, no matter how irrational.

20. And you’ve supported my dreams, no matter how ridiculous.

21. And I’ll always have your back, even when I don’t want to.

22. I guess what I’m trying to say is that you’re pretty darn great.

23. And I proooobably couldn’t live without you.

24. Phew. Glad that’s out of the way. Good talk, buddy.

25. Now let’s pretend this never happened and go back to playin’ it cool.

Rejection can feel like physical pain because they follow the same pathway in the brain!

Physical pain and intense feelings of social rejection "hurt" in the same way, a new study shows.

The study demonstrates that the same regions of the brain that become active in response to painful sensory experiences are activated during intense experiences of social rejection.

Earlier research has shown that the same brain regions support the emotionally distressing feelings that accompany the experience of both physical pain and social rejection.

However, the current study is the first known to establish that there is neural overlap between both of these experiences in brain regions that become active when people experience painful sensations in their body.

The team that performed the research hopes that the findings will offer new insight into how the experience of intense social loss may lead to various physical pain symptoms and disorders.

Also, Tylenol may reduce the emotional pain!

Universe History

Universe – Overview

The universe was born with the Big Bang as an unimaginably hot, dense point. When the universe was just 10-34 of a second or so old — that is, a hundredth of a billionth of a trillionth of a trillionth of a second in age — it experienced an incredible burst of expansion known as inflation, in which space itself expanded faster than the speed of light. During this period, the universe doubled in size at least 90 times, going from subatomic-sized to golf-ball-sized almost instantaneously.

After inflation, the growth of the universe continued, but at a slower rate. As space expanded, the universe cooled and matter formed. One second after the Big Bang, the universe was filled with neutrons, protons, electrons, anti-electrons, photons and neutrinos.

During the first three minutes of the universe, the light elements were born during a process known as Big Bang nucleosynthesis. Temperatures cooled from 10^32 degrees K to 10^9 degrees K, and protons and neutrons collided to make deuterium, an isotope of hydrogen. Most of the deuterium combined to make helium, and trace amounts of lithium were also generated.

For the first 380,000 years or so, the universe was essentially too hot for light to shine. The heat of creation smashed atoms together with enough force to break them up into a dense plasma, an opaque soup of protons, neutrons and electrons that scattered light like fog.

Roughly 380,000 years after the Big Bang, matter cooled enough for atoms to form during the era of recombination, resulting in a transparent, electrically neutral gas. This set loose the initial flash of light created during the Big Bang, which is detectable today as cosmic microwave background radiation. However, after this point, the universe was plunged into darkness, since no stars or any other bright objects had formed yet.

About 400 million years after the Big Bang, the universe began to emerge from the cosmic dark ages during the epoch of reionization. During this time, which lasted more than a half-billion years, clumps of gas collapsed enough to form the first stars and galaxies, whose energetic ultraviolet light ionized and destroyed most of the neutral hydrogen.

Although the expansion of the universe gradually slowed down as the matter in the universe pulled on itself via gravity, about 5 or 6 billion years after the Big Bang, a mysterious force now called dark energy began speeding up the expansion of the universe again, a phenomenon that continues today.

A little after 9 billion years after the Big Bang, our solar system was born.

The Big Bang

The Big Bang did not occur as an explosion in the usual way one think about such things, despite one might gather from its name. The universe did not expand into space, as space did not exist before the universe. Instead, it is better to think of the Big Bang as the simultaneous appearance of space everywhere in the universe. The universe has not expanded from any one spot since the Big Bang — rather, space itself has been stretching, and carrying matter with it.

Since the universe by its definition encompasses all of space and time as we know it, it is beyond the model of the Big Bang to say what the universe is expanding into or what gave rise to the Big Bang. Although there are models that speculate about these questions, none of them have made realistically testable predictions as of yet.

Age

The universe is currently estimated at roughly 13.7 billion years old, give or take 130 million years. In comparison, the solar system is only about 4.6 billion years old.

This estimate came from measuring the composition of matter and energy density in the universe. This allowed researchers to compute how fast the universe expanded in the past.  With that knowledge, they could turn the clock back and extrapolate when the Big Bang happened. The time between then and now is the age of the universe.

Structure

Scientists think that in the earliest moments of the universe, there was no structure to it to speak of, with matter and energy distributed nearly uniformly throughout. The gravitational pull of small fluctuations in the density of matter back then gave rise to the vast web-like structure of stars and emptiness seen today. Dense regions pulled in more and more matter through gravity, and the more massive they became, the more matter they could pull in through gravity, forming stars, galaxies and larger structures known as clusters, superclusters, filaments and walls, with "great walls" of thousands of galaxies reaching more than a billion light years in length. Less dense regions did not grow, evolving into area of seemingly empty space called voids.

Content

Until about 30 years ago, astronomers thought that the universe was composed almost entirely of ordinary atoms, or "baryonic matter." However, recently there has been ever more evidence that suggests most of the ingredients making up the universe come in forms that we can not see.

It turns out that atoms only make up 4.6 percent of the universe. Of the remainder, 23 percent is made up of dark matter, which is likely composed of one or more species of subatomic particles that interact very weakly with ordinary matter, and 72 percent is made of dark energy, which apparently is driving the accelerating expansion of the universe.

When it comes to the atoms we are familiar with, hydrogen makes up about 75 percent, while helium makes up about 25 percent, with heavier elements making up only a tiny fraction of the universe's atoms.

Shape

The shape of the universe and whether or not it is finite or infinite in extent depends on the struggle between the rate of its expansion and the pull of gravity. The strength of the pull in question depends in part on the density of the matter in the universe.

If the density of the universe exceeds a specific critical value, then the universe is "closed" and "positive curved" like the surface of a sphere. This means light beams that are initially parallel will converge slowly, eventually cross and return back to their starting point, if the universe lasts long enough. If so, the universe is not infinite but has no end, just as the area on the surface of a sphere is not infinite but has no beginning nor end to speak of. The universe will eventually stop expanding and start collapsing in on itself, the so-called "Big Crunch."

If the density of the universe is less than this critical density, then the geometry of space is "open" and "negatively curved" like the surface of a saddle. If so, the universe has no bounds, and will expand forever.

If the density of the universe exactly equals the critical density, then the geometry of the universe is "flat" with zero curvature like a sheet of paper. If so, the universe has no bounds and will expand forever, but the rate of expansion will gradually approach zero after an infinite amount of time. Recent measurements suggest that the universe is flat with only a 2 percent margin of error.

It is possible that the universe has a more complicated shape overall while seeming to possess a different curvature. For instance, the universe could have the shape of a torus, or doughnut.

Expanding Universe

In the 1920s, astronomer Edwin Hubble discovered the universe was not static. Rather, it was expanding, a find that revealed the universe was apparently born in a Big Bang.

After that, it was long thought the gravity of matter in the universe was certain to slow the expansion of the universe. Then, in 1998, the Hubble Space Telescope's observations of very distant supernovae revealed that a long time ago, the universe was expanding more slowly than it is today. In other words, the expansion of the universe was not slowing due to gravity, but instead inexplicably was accelerating. The name for the unknown force driving this accelerating expansion is dark energy, and it remains one of the greatest mysteries in science.

Physical Distribution Functions -Marketing Management

Physical Distribution Functions Of Marketing

The physical distribution functions include transportation and storage of goods. Until the goods have been sold out they should be kept safe and after selling they should be transported from one place to another. For this, arrangement transport becomes necessary. Transportation and storage are included in the physical distribution functions of marketing.

1. Transportation

Transport is the means to carry goods from one place to another. It creates place utility of goods. Transportation in marketing becomes necessary because the goods are not used in the place of production. The goods produced at one place should be carried thousands of miles away for selling. Transport is very important means to expand market and seek seek opportunities of new markets. In fact, trade and market have been developing at a faster pace with the development in the means of transportation, their speed and increase in security. Because of the transport facility, mass production of goods and wider distribution has become easy. Transportation has played a significant role to increase time utility of goods, to minimize price fluctuation and to provide better services to customers at lower cost.

2. Storage

In marketing process, it becomes necessary to make proper storage of goods and warehouse management. There remains long interval between the time of production of goods and their use. Some goods are produced only in certain season and are use for whole year. After the goods have been produced, they should kept safe in store until consumers make demand. Storage or warehouse management helps to keep the supply of goods stable as well as regular in market. This creates time utility of goods.

Objectives for Physical Distribution

Physical distribution decisions include choosing a transportation mode to distribute goods.

Physical distribution refers to the processes through which a business moves a product through distribution channels and gets it to its customers. Physical distribution is the sum of a firm's warehouse location decisions, inventory control processes, order handling and transportation decisions. The goal for a firm is to manage all these aspects so as to minimize its total physical distribution costs.

Warehouse Location

A firm needs warehouses as storage facilities for finished goods. One objective of physical distribution is to decide how many warehouse locations the firm needs, and where to locate them. If the warehouses are too far away from the consumer, it might mean a slower time to deliver the product to the customer. On the other hand, if it is close to the customer location, the cost of the warehouse might increase the total cost of distribution.

Order Handling

In processing a customer's order, the firm might have to move it through a number of channels. It could go from the manufacturer to the wholesaler to the retailer, and finally reach the consumer. Some firms have found ways to cut down on the multiple middlemen involved in this classic distribution system. Online ordering allows a customer to order directly from the manufacturer, cutting down some of these distribution costs.

Inventory Policies

There is a trade-off for a firm between having too much inventory on hand, with its incurred additional costs, and not having enough inventory on hand to satisfy shifting customer demand. Another objective for physical distribution is to put in suitable inventory policies so as to bring down the total cost of the physical distribution function.

Transportation

The firm also has to make decisions relating to what mode of transportation to use for its physical distribution. For instance, it could truck the products, ship them, send them by train, or fly them. One factor that influences the decision is the cost of transportation. There is also the speed factor. Sending a product by air is faster for international delivery, but it is also likely to be more expensive. Other decisions related to transportation include how often to transport goods, or the frequency of transportation, and the transportation route.

Objectives of Warehousing & Distribution

Warehousing is the placement of products, merchandising and goods in storage units as a major part of distribution management. Goods may move between multiple warehousing and distribution systems from the time they are initially manufactured to the time they ultimately are delivered to end users. The managerial logistics that ensure an efficient and timely flow between these distributions points define the objectives of warehousing and distribution.

Transportation

Transportation is among the highest costs faced by many firms in the supply chain process, say Ronald J. Ebert and Ricky W. Griffin, authors of "Business Essentials." Transportation costs will be effected by the transportation method, product nature, travel distance and the need for speed. An objective in distribution operations is to manage these costs through effective integration of intermodal transportation methods and information technology for in-transit tracking.

Storage

Warehouse operations involve receiving and storing goods. Storage is typically defined as the safekeeping of goods in a depository. Warehouse storage is a temporary state for goods moving along the distribution trajectory to the customer. While in storage, the objective is to provide a secure and controlled environment that is consistent with the material nature of the goods.

Material Handling

Material handling is the movement of individual, packaged and bulk goods using labor and machines. This may involve an assortment of activities between the receiving and put-away processes. According to the Material Handling Industry of America, there are ten core principles of material handling: planning, standardization, work, ergonomic, unit load, space utilization, system, automation, environment and life cycle cost. The objective is to ensure handling is both timely and that handled goods arrive to destination points physically intact.

Fulfillment

Fulfillment is the process of receiving, processing and shipping orders from warehouse inventory. Monitoring operations and performance is key to improving the productivity and accuracy of order fulfillment. Computerizing of warehouse operations greatly increases the ability to identify causes of information and material flow problems and allows managers to pinpoint areas for improvement, such as order-picking strategies.

Dividend & Working Capital -Finanace Management

DIVIDEND

Meaning of Dividend

Dividend refers to the business concerns net profits distributed among the shareholders. It

may also be termed as the part of the profit of a business concern, which is distributed

among its shareholders.

According to the Institute of Chartered Accountant of India, dividend is defined as

“a distribution to shareholders out of profits or reserves available for this purpose”.

TYPES OF DIVIDEND/FORM OF DIVIDEND

Dividend may be distributed among the shareholders in the form of cash or stock. Hence,

Dividends are classified into:

A. Cash dividend

B. Stock dividend

C. Bond dividend

D. Property dividend

Cash Dividend

If the dividend is paid in the form of cash to the shareholders, it is called cash dividend. It is paid periodically out the business followed EAIT (Earnings after interest and tax). Cash dividends are common and popular types followed by majority of the business concerns.

Stock Dividend

Stock dividend is paid in the form of the company stock due to raising of more finance. Under this type, cash is retained by the business concern. Stock dividend may be bonus issue. This issue is given only to the existing shareholders of the business concern.

Bond Dividend

Bond dividend is also known as script dividend. If the company does not have sufficient

funds to pay cash dividend, the company promises to pay the shareholder at a future

specific date with the help of issue of bond or notes.

Property Dividend

Property dividends are paid in the form of some assets other than cash. It will distributed

under the exceptional circumstance. This type of dividend is not published in India.

Irrelevance of Dividend

According to professors Soloman, Modigliani and Miller, dividend policy has no effect on the share price of the company. There is no relation between the dividend rate and value of the firm. Dividend decision is irrelevant of the value of the firm. Modigliani and Miller contributed a major approach to prove the irrelevance dividend concept.

Modigliani and Miller’s Approach

According to MM, under a perfect market condition, the dividend policy of the company is irrelevant and it does not affect the value of the firm. “Under conditions of perfect market, rational investors, absence of tax discrimination between dividend income and capital appreciation, given the firm’s investment policy, its dividend policy may have no influence on the market price of shares”.

Assumptions

MM approach is based on the following important assumptions:

1. Perfect capital market.

2. Investors are rational.

3. There are no tax.

4. The firm has fixed investment policy.

5. No risk or uncertainty.

Criticism of MM approach

MM approach assumes that tax does not exist. It is not applicable in the practical life of the firm.

MM approach assumes that, there is no risk and uncertain of the investment. It is also not applicable in present day business life.

MM approach does not consider floatation cost and transaction cost. It leads to affect the value of the firm.

MM approach considers only single decrement rate, it does not exist in real practice.

MM approach assumes that, investor behaves rationally. But we cannot give assurance that all the investors will behave rationally.

RELEVANCE OF DIVIDEND

According to this concept, dividend policy is considered to affect the value of the firm. Dividend relevance implies that shareholders prefer current dividend and there is no direct relationship between dividend policy and value of the firm. Relevance of dividend concept is supported by two eminent persons like Walter and Gordon.

Walter’s Model

Prof. James E. Walter argues that the dividend policy almost always affects the value of the firm. Walter model is based in the relationship between the following important factors:

• Rate of return I

• Cost of capital (k)

According to the Walter’s model, if r > k, the firm is able to earn more than what the shareholders could by reinvesting, if the earnings are paid to them. The implication of r > k is that the shareholders can earn a higher return by investing elsewhere.

If the firm has r = k, it is a matter of indifferent whether earnings are retained or distributed.

Assumptions

Walters model is based on the following important assumptions:

1. The firm uses only internal finance.

2. The firm does not use debt or equity finance.

3. The firm has constant return and cost of capital.

4. The firm has 100 recent payout.

5. The firm has constant EPS and dividend.

6. The firm has a very long life.

Criticism of Walter’s Model

The following are some of the important criticisms against Walter model:

Walter model assumes that there is no extracted finance used by the firm. It is not practically applicable.

There is no possibility of constant return. Return may increase or decrease, depending upon the business situation. Hence, it is applicable.

According to Walter model, it is based on constant cost of capital. But it is not applicable in the real life of the business.

Gordon’s Model

Myron Gorden suggest one of the popular model which assume that dividend policy of a firm affects its value, and it is based on the following important assumptions:

1. The firm is an all equity firm.

2. The firm has no external finance.

3. Cost of capital and return are constant.

4. The firm has perpectual life.

5. There are no taxes.

6. Constant relation ratio (g=br).

7. Cost of capital is greater than growth rate (Ke>br).

Criticism of Gordon’s Model

Gordon’s model consists of the following important criticisms:

Gordon model assumes that there is no debt and equity finance used by the firm. It is not applicable to present day business.

Ke and r cannot be constant in the real practice.

FACTORS DETERMINING DIVIDEND POLICY

Profitable Position of the Firm

Dividend decision depends on the profitable position of the business concern. When the firm earns more profit, they can distribute more dividends to the shareholders.

Uncertainty of Future Income

Future income is a very important factor, which affects the dividend policy. When the shareholder needs regular income, the firm should maintain regular dividend policy.

Legal Constrains

The Companies Act 1956 has put several restrictions regarding payments and declaration of dividends. Similarly, Income Tax Act, 1961 also lays down certain restrictions on payment of dividends.

Liquidity Position

Liquidity position of the firms leads to easy payments of dividend. If the firms have high liquidity, the firms can provide cash dividend otherwise, they have to pay stock dividend.

Sources of Finance

If the firm has finance sources, it will be easy to mobilise large finance. The firm shall not go for retained earnings.

Growth Rate of the Firm

High growth rate implies that the firm can distribute more dividend to its shareholders.

Tax Policy

Tax policy of the government also affects the dividend policy of the firm. When the government gives tax incentives, the company pays more dividend.

Capital Market Conditions

Due to the capital market conditions, dividend policy may be affected. If the capital market is prefect, it leads to improve the higher dividend.model, there are no tax paid by the firm. It is not practically applicable.

Working capital

Working Capital is another part of the capital which is needed for meeting day to day requirement of the business concern. For example, payment to creditors, salary paid to workers, purchase of raw materials etc., normally it consists of recurring in nature. It can be easily converted into cash. Hence, it is also known as short-term capital.

Definitions

According to the definition of Mead, Baker and Malott, “Working Capital means Current

Assets”.

According to the definition of J.S.Mill, “The sum of the current asset is the working capital of a business”.

According to the definition of Weston and Brigham, “Working Capital refers to a firm’s investment in short-term assets, cash, short-term securities, accounts receivables and inventories”.

According to the definition of Bonneville, “Any acquisition of funds which increases the current assets, increase working capital also for they are one and the same”.

According to the definition of Shubin, “Working Capital is the amount of funds necessary to cover the cost of operating the enterprises”.

According to the definition of Genestenberg, “Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another, for example, from cash to inventories, inventories to receivables, receivables to cash”.

CONCEPT OF WORKING CAPITAL

Working capital can be classified or understood with the help of the following two important

concepts.

Gross Working Capital

Gross Working Capital is the general concept which determines the working capital concept. Thus, the gross working capital is the capital invested in total current assets of the business concern. Gross Working Capital is simply called as the total current assets of the concern.

GWC = CA

Net Working Capital

Net Working Capital is the specific concept, which considers both current assets and current liability of the concern. Net Working Capital is the excess of current assets over the current liability of the

concern during a particular period.

If the current assets exceed the current liabilities it is said to be positive working capital; it is reverse, it is said to be Negative working capital.

NWC = C A – CL

Component of Working Capital

TYPES OF WORKING CAPITAL

Working Capital may be classified into three important types on the basis of time.

Permanent Working Capital

It is also known as Fixed Working Capital. It is the capital; the business concern must maintain certain amount of capital at minimum level at all times. The level of Permanent Capital depends upon the nature of the business. Permanent or Fixed Working Capital will not change irrespective of time or volume of sales.

Temporary Working Capital

It is also known as variable working capital. It is the amount of capital which is required to meet the Seasonal demands and some special purposes. It can be further classified into Seasonal Working Capital and Special Working Capital.

The capital required to meet the seasonal needs of the business concern is called as Seasonal Working Capital. The capital required to meet the special emergencies such as launching of extensive marketing campaigns for conducting research, etc.

Semi Variable Working Capital

Certain amount of Working Capital is in the field level up to a certain stage and after that it will increase depending upon the change of sales or time.

NEEDS OF WORKING CAPITAL

Working Capital is an essential part of the business concern. Every business concern must

maintain certain amount of Working Capital for their day-to-day requirements and meet the short-term obligations.

Working Capital is needed for the following purposes.

1. Purchase of raw materials and spares: The basic part of manufacturing process is, raw materials. It should purchase frequently according to the needs of the business concern. Hence, every business concern maintains certain amount as Working Capital to purchase raw materials, components, spares, etc.

2. Payment of wages and salary: The next part of Working Capital is payment of wages and salaries to labour and employees. Periodical payment facilities make employees perfect in their work. So a business concern maintains adequate the amount of working capital to make the payment of wages and salaries.

3. Day-to-day expenses: A business concern has to meet various expenditures regarding the operations at daily basis like fuel, power, office expenses, etc.

4. Provide credit obligations: A business concern responsible to provide credit facilities to the customer and meet the short-term obligation. So the concern must provide adequate Working Capital.

Working Capital Position/ Balanced Working Capital Position.

A business concern must maintain a sound Working Capital position to improve the efficiency of business operation and efficient management of finance. Both excessive and inadequate Working Capital lead to some problems in the business concern.

A. Causes and effects of excessive working capital.

(i) Excessive Working Capital leads to unnecessary accumulation of raw materials, components and spares.

(ii) Excessive Working Capital results in locking up of excess Working Capital.

(iii) It creates bad debts, reduces collection periods, etc.

(iv) It leads to reduce the profits.

B. Causes and effects of inadequate working capital

(i) Inadequate working capital cannot buy its requirements in bulk order.

(ii) It becomes difficult to implement operating plans and activate the firm’s profit target.

(iii) It becomes impossible to utilize efficiently the fixed assets.

(iv) The rate of return on investments also falls with the shortage of Working Capital.

(v) It reduces the overall operation of the business.

FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

Working Capital requirements depends upon various factors. There are no set of rules or formula to determine the Working Capital needs of the business concern. The following are the major factors which are determining the Working Capital requirements.

1. Nature of business: Working Capital of the business concerns largely depend upon the nature of the business. If the business concerns follow rigid credit policy and sell goods only for cash, they can maintain lesser amount of Working Capital.

A transport company maintains lesser amount of Working Capital while a construction company maintains larger amount of Working Capital.

2. Production cycle: Amount of Working Capital depends upon the length of the production cycle. If the production cycle length is small, they need to maintain lesser amount of Working Capital. If it is not, they have to maintain large amount of Working Capital.

3. Business cycle: Business fluctuations lead to cyclical and seasonal changes in the business condition and it will affect the requirements of the Working Capital. In the booming conditions, the Working Capital requirement is larger and in the

depression condition, requirement of Working Capital will reduce. Better business results lead to increase the Working Capital requirements.

4. Production policy: It is also one of the factors which affects the Working Capital requirement of the business concern. If the company maintains the continues production policy, there is a need of regular Working Capital. If the production

policy of the company depends upon the situation or conditions, Working Capital

requirement will depend upon the conditions laid down by the company.

5. Credit policy: Credit policy of sales and purchase also affect the Working Capital requirements of the business concern. If the company maintains liberal credit policy to collect the payments from its customers, they have to maintain more Working Capital. If the company pays the dues on the last date it will create the cash maintenance in hand and bank.

6. Growth and expansion: During the growth and expansion of the business concern, Working Capital requirements are higher, because it needs some additional Working Capital and incurs some extra expenses at the initial stages.

7. Availability of raw materials: Major part of the Working Capital requirements are largely depend on the availability of raw materials. Raw materials are the basic components of the production process. If the raw material is not readily available, it leads to production stoppage. So, the concern must maintain adequate raw material; for that purpose, they have to spend some amount of Working Capital.

8. Earning capacity: If the business concern consists of high level of earning capacity, they can generate more Working Capital, with the help of cash from

operation. Earning capacity is also one of the factors which determines the Working Capital requirements of the business concern.

COMPUTATION (OR ESTIMATION) OF WORKING CAPITAL

Working Capital requirement depends upon number of factors, which are already discussed in the previous parts. Now the discussion is on how to calculate the Working Capital needs of the business concern. It may also depend upon various factors but some of the common methods are used to estimate the Working Capital.

A. Estimation of components of working capital method

Working capital consists of various current assets and current liabilities. Hence,.we have to estimate how much current assets as inventories required and how

much cash required to meet the short term obligations. Finance Manager first estimates the assets and required Working Capital for a particular period.

B. Percent of sales method

Based on the past experience between Sales and Working Capital requirements, a ratio can be determined for estimating the Working Capital requirement in future. It is the simple and tradition method to estimate the Working Capital requirements.

Under this method, first we have to find out the sales to Working Capital ratio and based on that we have to estimate Working Capital requirements. This method also expresses the relationship between the Sales and Working Capital.

C. Operating cycle

Working Capital requirements depend upon the operating cycle of the business. The operating cycle begins with the acquisition of raw material and ends with the collection of receivables.

Operating cycle consists of the following important stages:

1. Raw Material and Storage Stage, (R)

2. Work in Process Stage, (W)

3. Finished Goods Stage, (F)

4. Debtors Collection Stage, (D)

5. Creditors Payment Period Stage. (C)

R

D W

F

O = R + W + F + D–C

Sources of Working Capital

The above sources are also classified into internal sources and external sources of

working capital.

Internal sources such as:

• Retained Earnings

• Reserve and Surplus

• Depreciation Funds etc.

External sources such as:

• Debentures and Public Deposits

• Loans from Banks and Financial Institutions

• Advances and Credit

• Financial arrangements like Factoring, etc.