The working capital needs of a firm are determined and influenced by various factors. A wide variety of considerations may affect the quantum of working capital required and these considerations may vary from time to time. The working capital needed at one point of time may not be good enough for some other situation. The determination of working capital requirement is a continuous process and must be undertaken on a regular basis in the light of the changing situations. Following are some of the factors which are relevant in determining the working capital needs of the firm: 1. Basic Nature of Business: The working capital requirement is closely related to the nature of the business of the firm. In case of a retail shop or a trading firm, the amount of working capital required is small enough. Most of the transactions are undertaken in cash and the length of the operating cycle is generally small. The trading concerns usually have smaller needs of working capital, however, in certain cases, large inventories of goods may be required and consequently the working capital may be large. In case of financial concerns (engaged in financial business) there may not be stock of goods but these firms do have to maintain sufficient liquidity all the times. In case of manufacturing concerns, different types of production processes are performed. One unit of raw material introduced in the production schedule may take a long period before it is available as finished goods for sale. Funds are blocked not only in raw materials but also in labor expenses and overheads at every stage of production. The operating cycle is usually a longer one and sales are made generally on credit terms. So, in case of manufacturing concerns, there is a requirement of substantial working capital. 2. Business Cycle Fluctuations: Different phases of business cycle i.e., boom, recession, recovery etc. also affect the working capital requirement. In case of boom conditions, inflationary pressure appears and business activities expand. As a result, the overall need for cash, inventories etc. increases resulting in more and more funds blocked in these current assets. Â In case of recession period however, there is usually a dullness in business activities and there will be an opposite effect on the level of working capital requirement. There will be a fall in inventories and cash requirement etc. 3. Seasonal Operations: If a firm is operating in goods and services having seasonal fluctuations in demand, then the working capital requirement will also fluctuate with every change. In a cold drink factory, the demand will certainly be higher during summer season and therefore, more working capital is required to maintain higher production, in the form of larger inventories and bigger receivables. On the other hand, if the operations are smooth and even through out the year then the working capital requirement will be constant and will not be affected by the seasonal factors. 4. Market Competitiveness: The market competitiveness has an important bearing on the working capital needs of a firm. In view of the competitive conditions prevailing in the market, the firm may have to offer liberal credit terms to the customers resulting in higher debtors. Even larger inventories may be maintained to serve an order as and when received; otherwise the customer may go to some other supplier. Thus, the working capital tends to be high as a result of greater investment in inventories and receivable. On the other hand, a monopolistic firm may not require larger working capital. It may ask the customers to pay in advance or to wait for some time after placing the order. 5. Credit Policy: The credit policy means the totality of terms and conditions on which goods are sold and purchased. A firm has to interact with two types of credit policies at a time. One, the credit policy of the supplier of raw materials, goods etc., and two, the credit policy relating to credit which it extends to its customers. In both the cases, however, the firm while deciding its credit policy, has to take care of the credit policy of the market. For example, a firm might be purchasing goods and services on credit terms but selling goods only for cash. The working capital requirement of this firm will be lower than that of a firm which is purchasing cash but has to sell on credit basis. 6. Supply Conditions: The time taken by a supplier of raw materials, goods etc. after placing an order, also determines the working capital requirement. If goods are received as soon as or in a short period after placing an order, then the purchaser will not like to maintain a high level of inventory of that good. Otherwise, larger inventories should be kept e.g., in case of imported goods. It is often seen that the shopkeepers may not be keeping stock of all items, but whenever there is a demand, they procure from the wholesaler/producer and supply it to their customers. Thus, the working capital requirement of a firm is determined by a host of factors. Every consideration is to be weighted relatively to determine the working capital requirement. Further, the determination of working capital requirement is not once a while exercise, rather a continuous review must be made in order to assess the working capital requirement in the changing situation. There are various reasons which may require the review of the working capital requirement e.g., change in credit policy, change in sales volume etc.
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12/16/2019 0 Comments Preparation of a Halogenoalkane EssayHence pure product can be obtained when we distillate the mixture at a temperature of 45oC-55oC. Discussion The reaction between HCl and the 2-methylpropan-2-ol will build up pressure in the conical flask. It is because the reaction is exothermic, it causes serious evaporation, giving out a large amount of water vapour. And the sudden build up of pressure may break the funnel hence HCl is added in 10 portions but not all together. The separating funnel is used to separate 2 immiscible layer of liquid. When the mixture is stable, the denser liquid will be at bottom and the other will be on top.
When we open the tap, the bottom layer can be obtained, leaving the upper one left in the funnel. The liquid at the junction of the 2 layer should be removed as that is a mixture of the 2 layer which is impure. Although this can ensure a pure product obtained, but this will reduce the yield since some chemical is lost. Anhydrous sodium sulphate is added to make sure all water is removed. Because the presence of water may increase the difficulty of distillation. Since high temperature favor the dissolve of product into water. Also if water is presented in the distillation process, water may evaporate and contaminate the distillate. Hence all water must be removed. The reaction of sodium sulphate with water is as follow: Na2SO4+10H2O? Na2SO4•10H2O Filtration can remove insoluble substance from a mixture. With the use of filter paper, only liquid passes through, the solid is left as residue. A clean mixture can hence be obtained. Distillation is used to separate a miscible mixture with distinct boiling point. One liquid can be distillate when the solution reaches its boiling point. The other liquid will be left behind since the temperature is not high enough to vaporize that liquid. The water in of condenser should be at the lower end to make sure water can stay in the condenser for a longer time. In this synthesis SN1 reaction is favored for several reasons. Firstly, a tertiary alcohol is presented in the experiment. The alcohol we used have 3 alkyl group, the molecule is therefore sterically hindered, this will favor SN1. Cl- is the weak base used in the reaction, this will also favor SN1 reaction. Thirdly the carbocation formed, is stable, since the three attached alkyl groups do positive inductive effect on the carbocation, making it less positive. The stable carbocation will also favor the SN1 reaction. It should be noted that acidic medium is necessary for the reaction. It is because OH- is a poor living group, in normal situation it may attach back to the carbocation. In an acidic medium, the –OH group is protonated first. The breaking of C—O bond will give a H2O molecule which is a stable living group and prevent OH- to interfere the experiment. In the experiment NaHCO3 is used to remove HCl rather than NaOH or other strong base. It is because a reaction between HCl and a strong base will produce a large amount of heat. The increase in temperature combine with the acidic medium will favor elimination which is unwanted and may affect the yielding of the reaction. There are several errors in the experiment: the alcohol used in the reaction is volatile, this will lead to a loss of material during the process. We should perform the experiment faster in order to reduce the loss and to obtain a larger yield of product. When we separate the organic layer and the aqueous layer using the separating funnel, the liquid in the junction of 2 layers is removed. This will drain away some chemical. The loss in the chemical content will reduce the yield. We can improve the situation by removing the organic layer as less as possible. During the transfer of material, some material will be left behind. The loss of material will also reduce the yield. We should wait when we transfer the material, until all material adhere to the surface is transferred. While filtrating, some solution is left on the filter paper, which will lead to a loss of chemical. We should wait until no more liquid is drained from the filter paper to make sure all chemical is collected. |