What is Working Capital?
Putting mathematics in words, working capital is entity’s investment in current assets. Usually we use working capital as a measure to determine entity’s ability to coup efficiently with its liabilities. Most of the time this term is used to mean net working capital which is expressed as: current assets - current liabilities. But remember net working capital […]
What is Cash Conversion Cycle and how to interpret it?
Cash conversion cycle is one of the important tools in hands of users of financial statements including investors to measure liquidity performance of the business and ultimately it will also reflect how good the entity is being managed with its resources especially in short-term. Cash is life line of every kind of business. Without cash […]
What is Cash cow?
Boston Consulting Group (BCG) developed a product analysis methodology in which entity’s product portfolio is analysed against two criteria or potentials i.e. market share and market growth. On the basis of such analysis products can be divded in four categories. One of the four categories is named as cash cow which represents such products that hold high […]
What is Backcasting? How is it different from Forecasting?
Backcasting is what can be understood as the opposite of forecasting and is one of the techniques to manage uncertainties and risks pertaining to future just like forecasting. However the way backcasting and forecasting approaches “the future” is very different. In forecasting we gather information about present conditions and then extrapolate them according to expectations, […]
What is the difference between soft capital rationing and hard capital rationing
Capital rationing is the process of regulating the capital expenditure when capital is scarce. When capital is in limited supply i.e. raising capital is not easy then company will have to pick and choose between what investment choose and what to just let go even if all the investments are favourable. This is done by […]
What is Capital rationing?
Rationing basically means a process of controlled distribution of such resource which is scarce i.e. available in limited supply. The basic reason behind controlling the distribution process is to ensure that resource is distributed fairly and no one is left deprived of such resource or at least perception of deprivation does not arise. The same […]
