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What knowledge is needed to be an auctioneer?

Posted: Sun Dec 22, 2024 5:16 am
by mostakimvip04
Generally speaking, there are two types of working capital: gross working capital and net working capital, which can be permanent or variable.

Gross working capital is nothing more than the total current assets , while net working capital is the difference between current assets and current liabilities .

Note that current assets and liabilities are not necessarily just cash or debts, but can also represent products in stock or common expenses.

In this sense, they can be classified as permanent or variable. Permanent working capital is the minimum capital needed to keep the company running and meeting its demands.

On the other hand, variable working capital is that which can be added or removed from the company due to a temporary need.

How do I know if I really need working capital?
It's simple: regardless of who your clients are (the state or the private sector), having working capital is essential to keep your company running during those months when movement tends to be lower in your sector.

In the case of companies that want to sell to the government, this tool is even more important, since the State pays for the contracted services or products up to 30 days after delivery, however, this period can be extended for another 90 days.

If a company does not have enough working capital to keep operating for such a period, what happens if the State has to extend the payment?

This is a mentality that entrepreneurs must have with the State, but which must also extend to other clients in the private sector, after all, no one wants to have to take on a very large debt that compromises the functioning of their company.

What is working capital management?
What is working capital management?

Working capital management is an accounting strategy focused on maintaining the financial balance between a company's assets and liabilities.

Through good working capital management, it is possible to cover your financial obligations and increase the company's profits.

Characteristics of good working capital management
Good working capital management takes into account all the factors involved in the company's day-to-day operations.

Things ranging from employee salaries to maintenance costs and other indicators, such as inventory turnover, revenue divided by cost, etc.

What should be a company's ideal working capital?
In general terms, we can say that a company's ideal working capital is that which guarantees its operation with a profit margin.

The specific size of this capital, on the other hand, will vary greatly depending uk business email database on the company's current situation, its core business, the size of the company, its revenues, expenses, future liabilities, etc.

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Working capital: understand the formula to calculate it
There is a simple formula to calculate a company's working capital and it is:

CGL = AC - PC
CGL, or Net Working Capital, is equal to Current Assets minus Current Liabilities.

In other words, to calculate a company's working capital, simply subtract liabilities (bills, debts, payments, loans to be paid, etc.) from total assets (financial investments, cash, accounts receivable, products in stock, etc.).

Therefore, in addition to doing the calculation, you need to pay attention to some important factors.

First, you need to take into account accounts receivable, which are the result of long-term sales - when the customer takes your product and pays you later.

The longer the payments to be received (both the delivery period and the number of payments made in this way), the more resources the company will need to have to cover the accounts receivable while this money is not reflected in the revenue.

The stock needs to be modified according to the needs of the company's consumer market, which is why it undergoes constant investment changes, both in the type of product and its quantities.

The cash register and current account, on the other hand, are the places where the financial resources that are actually available to the company are concentrated.

It is the cash and current account that the entrepreneur will turn to when it comes to honoring his commitments and debts.

Working capital: necessary care
Working capital: necessary care

A concept that every entrepreneur must keep in mind to take the necessary care with their working capital is the contingency reserve.

A company does not always receive resources on a constant basis. Therefore, you must always be very aware of the amounts to be received and the monthly expenses required to keep the company operating.

It is very common that, in some months, expenses are greater than profits and this is when cash flow and contingency reserves are important.

It's simple: in every month in which the inflow of resources is greater than the expenses, that is, when there is a profit, it is important that this profit, instead of being pocketed, goes to a reserve that will cover these other months with less movement.

The ideal way to have a company with a well-managed operational cash flow and financial security is for this contingency reserve to be able to keep the company afloat without revenue for at least six months.

Taking these precautions is necessary when we are serving the private sector, but it is essential when we are talking about selling to the public sector, since, in total, the State can take up to 120 days to pay for a bid if all deadlines are extended.