KALYAN CITY LIFE

Sources of working capital

Following are various sources of working capital or short-term finance:

Image credits © Prof. Mudit Katyani.

Factors affecting working capital requirements

14 factors affecting working capital requirements of a business:

Image credits © Prof. Mudit Katyani.

1. Nature of business,
2. Size of business,
3. Time and complexities of manufacturing process,
4. Manufacturing cost,
5. Growth and Expansion,
6. Terms of purchase and sales,
7. Conditions of supply,
8. Market conditions,
9. Business cycle,
10. Operating cycle,
11. Rate of Turnover,
12. Cash requirements,
13. Seasonal variations, and
14. Other factors.

Importance of working capital

Every company needs working capital to meet its short-term expenses. It keeps the business moving. Without it, the business will stop, and the company will become sick.

Explained below is the importance of working capital.

Image credits © Prof. Mudit Katyani.

Advantages of Debit Card

The following points discuss important benefits or advantages of debit card.

ADVANTAGES OF DEBIT CARD

What is Debit Card? Definition

Debit card can be defined either in a simple way or detailed manner depending on how it is perceived with respect to different senses of finance. Following statements are few selected ones that lucidly express the definition of debit card within their individual perspectives. These definitions of debit card will help to get its overall understanding.

1. In a General sense,

“Debit card is a facility or utility provided by banking companies to their customers to help them execute (carry on, perform) different financial transactions anytime and anywhere that too with ease, comfort, speed and safety. Such a customer-friendly facility gives debit cardholders (users) a smarter and secured way to make quick payments while purchasing (i.e. during a sale transaction) various goods and/or services from any merchant (one that accepts a debit card) either from a traditional market or an online market.”

2. Within a Business perspective,

“Debit card is a suitable alternative to cash payment.”

Factors Influencing or Affecting Fixed Capital Requirement

Following diagram highlights the important factors influencing or affecting fixed capital requirement of a business. Click on image for a zoomed preview.

Explain Role or Importance of Fixed Capital

Following diagram briefly explain the main role or importance of fixed capital.

Sources of Fixed Capital or Long Term Finance

The main sources of fixed capital or long term finance are depicted below.

The sources of fixed capital or long term finance are:

1. Issue of Equity and Preference shares.
2. Issue of Right shares.
3. Private placement of shares.
4. Issue of debentures.
5. Term loans.
6. Retained earnings.
7. Lease financing.

Explain the Features of Turnaround Strategy

Following image briefly explains important features of turnaround strategy.

Meaning of Turnaround Strategy

Following diagram depicts the core meaning of turnaround strategy.

The concept or meaning of turnaround strategy covers following points:

1. Turnaround strategy means to convert, change or transform a loss-making company into a profit-making company.
2. It means to make the company profitable again.
3. The main purpose of implementing a turnaround strategy is to turn the company from a negative point to a positive one.
4. If a turnaround strategy is not applied to a sick company, it will close down.
5. It is a remedy for curing industrial sickness.
6. Turnaround is a restructuring strategy. Here, a loss-bearing company is transformed into a profit-earning company, by making systematic efforts.
7. It tries to remove all weaknesses to help a sick company once again become strong, stable and a profit-making institution.
8. It tries to reverse the position from loss to profit, from declining sales to increasing sales, from weakness to strength, and from an instability to stability.
9. It aids to reduce the brought forward losses of the loss-making company.
10. It helps the sick company to stand once again in the market.
11. It is a complete U-turn of a planned strategic economic transition.

What are the Advantages of Mergers?

The nine major advantages of mergers are depicted below.

What are the Advantages of Amalgamation?

The ten principal advantages of amalgamation are depicted below.

Priority Sector Lending Meaning

Priority sector plays an important role in the economic development of the country. Therefore, the Central (Federal) Government of any country gives this sector priority (first preference) in obtaining loans from banks at a low rate of interest. This is known as a ‘Priority Sector Lending’.

What are Types of Foreign Collaboration?

The four main types of foreign collaboration are depicted below.

The classification or types of foreign collaboration include namely:

1. Financial collaboration.
2. Technical collaboration.
3. Marketing collaboration.
4. Management consultancy collaboration.

Now let's proceed further to discuss each type of foreign collaboration.

What are Features of Foreign Collaboration?

The nine important features of foreign collaboration are depicted below.

Definition of Foreign Collaboration

In general, the definition of foreign collaboration can be stated as follows.

“Foreign collaboration is an alliance incorporated to carry on the agreed task collectively with the participation (role) of resident and non-resident entities.”

Alliance is a union or association formed for mutual benefit of parties.

Foreign collaboration is such an alliance of domestic (native) and abroad (non-native) entities like individuals, firms, companies, organizations, governments, etc., that come together with an intention to finalize a contract on some tasks or jobs or projects.

In finance, the definition of foreign collaboration can be specified as follows.

What are Features of Fixed Capital?

The ten important features of fixed capital are depicted in the following image.

Definition of Fixed Capital

In general, the definition of fixed capital can be stated as under.

“Fixed capital is a compulsory initial investment made by the entrepreneur to start up the activities of his business.”

Fixed capital is a mandatory one-time investment made at the introductory phase of a business establishment.

Fixed capital is not alike working capital, which is required on a continuous basis to operate (run) the ordinary course of production and distribution of goods and services.

Image credits © Vip223.

Definition of Amalgamation

In general, the definition of amalgamation can be stated as follows.

"Amalgamation is a union of two or more companies, made with an intention to form a new company."

In terms of finance, the definition of amalgamation can be given as under.

"Amalgamation is an agreement (deal) between two or more companies to consolidate (strengthen) their business activities by establishing a new company having a separate legal existence."

Image credits © Brad Ross.

Definition of Merger

The definition of merger in general and in finance can be stated as follows:

In General,

"Merger is an absorption of one or more companies by a single existing company."

In Finance,

"Merger is an act or process of purchasing equity shares (ownership shares) of one or more companies by a single existing company."