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Financial Analysis and Control Systems - Essay Example
Finance & Accounting
Pages 3 (753 words)
FINANCIAL ANALYSIS AND CONTROL SYSTEMS Name Institution Date Introduction Working capital management is one of the most significant tasks for all business managers and financial analysts. Business must strike a precise balance amid assets management and liability management for effective perpetual operation (Titman, 2002; p…
Importance of Working Capital Management in Budgeting There are various ways of developing working capital and working capital management. These starts with the simple duty of assessing the expenditures, revenue sources and the pending debts on daily, weekly, monthly or yearly basis. It is followed by planning before hand on how to strike a balance between these variables. To provide more cash for working capital management there is need to lower the costs of production whilst putting at level the sales revenue so as to increase the profit margin. Problems related with short term working capital management can be dealt with through trading short term liabilities for non-current liabilities and investing the amount allotted into the generation of revenue to pay off the long term debts (Masoud, 2007; p. 195). Working capital management helps in the process of controlled disbursement during budgeting. The bank which acts as a safe custody of the business is entitled with the mandate of giving a frequent report that gives the amount of disbursement that will be charged to the clients’ accounts. This prior information helps the business to plan accordingly on how the accounts can be executed and the manner in which they can be executed. Management of working capital helps in the process of reconciliation of accounts. ...
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