Accounting / July 27, 2018 / Sharon Hardin
Turnover Rates. Your business’s historical turnover rates are the first step in forecasting your growing working capital needs. You need to analyze your actual income statement and balance sheet to find out the following information How many days of inventory do I keep on hand (called inventory turnover)? How many days do customers take to pay me (called accounts receivable turnover)? How many days do I take to pay my vendors (accounts payable turnover)?.
The cash flows from operating activities section comes first and tells you how much cash the company generated from its core business, as opposed to peripheral activities such as investing or borrowing. This is the area you should focus most of your attention on because it paints the best picture of how well a firm's business operations are producing cash that will ultimately benefit shareholders.
Otherwise known as variable working capital, it is that portion of capital which is needed by the firm along with the permanent working capital, to fulfil short-term working capital needs that emerge out of fluctuation in the sales volume.
The act of using investor funds in exchange for a piece or "share" of your business is another way to raise capital. These funds can come from friends, family, angel investors, or venture capitalists.
In Case You Missed It