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SAMPLE MS-41 FIRST SEMESTER 2017
Course Code MS - 41 Course Title Working Capital Management Assignment Code MS-41/TMA/SEM - I/2017 Assignment Coverage All Blocks
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School of Management Studies INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
1. As a Finance Manager describe the various factors that you would take into consideration before assessing the working capital requirements. As a finance Manager in I --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. It differs from financial structure, which includes short-term debt and accounts payable. The ----------------------------------------------------------- decision are:
1. ----------------------------------- on equity 2. Capacity ------------------------------- Funds 3. ------------------------------attitudes 4. --------------------------------------------- 5. Assets ------------------------------- 6. Cash ------------------------------- a company 7. External environment -------------------------------------------------------------- regulations etc. 8. 'Other factors such as, ---------------------------------------------------------------------- finance, lender attitude etc. 1. Leverage or trading on equity: The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------however; it can increase the shareholders' return on their investment and often there are tax advantages associated with borrowing. also called leverage. Some of the main conclusions regarding the leverage in the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the earnings per share (EPS) prevailed the firm earns more on the assets purchased with these funds than the cost of their use. Earnings before interest and -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------because their source of finance costs lower, than per share capital and also the interest payable on, debt is, tax deductible. The use of fixed cost sources of finances also adds to the financial risk of the company and, therefore, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------financial leverage is one the important consideration in planning the capital structure for the company. 2. Capacity of Raising Funds: The size of a -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------If it is able to obtain some long-term loan, it will be available at a higher rate of interest and inconvenient terms. The highly restrictive covenants in loan agreements incase of small companies make -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------earnings for their long-term funds. It is quite difficult for small -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in the stock exchanges. 3. Management Attitudes: Management's -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------afford to ignore this factor. In fact every addition of equity unit in the capital -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of continued control. . 4. Control: In redesigning the capital -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------promoted by entrepreneurs. The existing management team not only wants control and ---------------------------------------------------------- any outside interference. 5. Assets Structure: Composition and -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------assured utilities for example - use long-term debt extensively similarly greater -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------its fixed charged obligations. 5. Cash flow ability of the company: When -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------fixed commitment charges include payment of interest on debentures and other debts, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of fixed charges will be high if the company employs a large amount of debt or -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of cash because inability on the part of management may result in financial insolvency. Therefore, cash flow analysis is essential to -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and vice-versa. To be on a safe side the cash flow ability must be determined in the period of depression very carefully.
6. External Environment: Any decision -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------etc. If the capital market is likely to be planned in bearish state and interest rates are expected to decline the management should postponed the debt for the present in order to take advantage of' cheap debt at a larger -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------doses of debt in capital structure. 7. Other Factors: All the factors -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, period of finance, tender's attitude, capital structure decisions of competitors etc. are equally important. Smaller companies confront tremendous problem in raising fund and these companies have to pay higher -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital. Similarly age of company plays an important role. New companies face a -------------------------------------- completely unknown to the suppliers of funds. These companies are compelled to ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------term debts. Similarly the period of finance should be paid due attention in the capital structure decision. When funds are required for permanent investment in a company, equity share to capital is preferred. -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------preference share and or debentures. Regardless of management analysis of proper leverage factor for their companies, there is no question but that lender's attitudes are frequently -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------lenders if possible.1t is also prudent to know about the existing practices -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is unhealthy in the absence of compelling circumstances. How to Determine Your Working Capital Needs Working capital is one of the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------definition, working capital is the amount by which current assets exceed current -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------your working capital needs are and how to meet them.
A more useful tool for determining -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in terms of days. In other words, accounts receivable are analyzed by the average number of days it takes to collect an account. Inventory is analyzed by the average number of days it takes to turn over the sale -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the average number of days it takes to pay a supplier invoice.
Most businesses cannot finance the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. This shortfall is typically covered by the net profits generated internally or by externally borrowed funds or by a combination of the two.
Most businesses need short------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and November for Christmas sales. But even a business that is not seasonal occasionally -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------receivable buildup.
Some small businesses have -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital during its first few years of operation, you will have several potential sources -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------business over the hump.
Here are the five most common sources of short-term working capital financing:
1. Equity. If your business -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. These funds might be injected from your own personal resources or from a family member, a friend or a third-party investor.
2. Trade creditors. If you have a -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------If you have paid on time in the past, a trade creditor may be willing to extend terms to enable you to meet a big order. For instance, if you receive a big order that you can fulfill, -------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------of the order and may want to file a lien on it as security, but if it enables you to proceed, that should not be a problem.
3. Factoring. Factoring is another -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the collection. This type of financing is more expensive than conventional bank financing but is often used by new businesses.
4. Line of credit. Lines of credit are not often -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------might qualify for one. A line of credit allows you to borrow funds for short-term needs when they arise. The funds are repaid once you collect the accounts receivable that -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------days sometime during the year to ensure that the funds are used for short-term needs only.
5. Short-term loan. While your new -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------temporary working capital needs. If you have -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and/or accounts receivable buildup.
In addition to analyzing the average --------------------------------------------------------------------------------------------------------------------------------------------------------------------, the operating cycle analysis provides one other important analysis.
You can see that working capital has -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is imperative to making any venture successful.
2. The Average Monthly Usage of a particular item in Reliable Industries Limited in the current year is expected to be 3000 units. The fixed cost per order is Rs. 1500/-. The purchase price is Rs. 2400 per box, containing a dozen units in each box. It, however, is not necessary to order for the full box of 12 units. The inventory carrying cost is 25% of the inventory value per annum. The quantity discount allowed per unit is 2%.
What will be the Optimum Order Quantity in each of the following three cases, on an Annual Usage Basis: When the minimum order size required for quantity discount is: (a) 1000 units (b) 3000 units (c) 10,000 units
Give reasons for your specific answers in each of three cases separately, duly supported by facts and figures.
Solution 2 (a)
Solution 2 (b)
Solution 2 (c)
3. “Trade credit is regarded as a spontaneous source of short term finance”, discuss and comment. Trade -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. For example, a store orders 100 boxes of chewing gum from a supplier. The
supplier delivers the boxes and sends the store a bill. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, it will order more inventory, using more trade credit. When --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to as "payables." Trade credit refers to the --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------with its suppliers is an important source of short-term finance. The credit-worthiness of a firm and the confidence of its suppliers are the main basis of securing trade credit.
It is mostly granted on an ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------whereby the buyer signs a bill of exchange payable on a specified future date.
When a --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------finances by stretching accounts payable, but it may have to pay penal interest charges as well as to forgo cash discount.
If a firm delays the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ not be allowed such credit facilities in future.
The main advantages of trade credit as a source of short-term finance include: (i) It is easy -------------------------------------------- of finance.
(ii) It is --------------------------------------------- the growth of the firm.
(iii) It is ---------------------------------------------- source of finance.
However, the ---------------------------------------------------------------------- by the suppliers and loss of cash discount.
Trade credit is the credit extended by one --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by business organisations as a source of short-term financing. It is granted to those customers who have reasonable amount of financial standing and goodwill.
There are many forms of trade credit in --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to accomplish various business objectives.
Trade credit is the largest use of capital for a majority of business-to-business (B2B) sellers in the United States and is a critical source of capital for a majority of all businesses. For example, Wal---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8 times the amount of capital invested by shareholders.
Example-
The operator of an ice cream --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------within 30 days, and a 20% discount on payment within 10 days. This means that the operator has 60 days to pay the invoice in full. If sales are good within the first week, the operator may be able to send a cheque for all or part of the --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------30 days, obtaining a 10% discount, or use the money another 30 days and pay the full invoice amount within 60 days.
The ice cream distributor can do the --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------position in this web of trade credit balances. Why would they do this? First, they have a substantial markup on the ingredients and other costs of production of the ice cream they sell to the operator. There are many --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and may be looking to expand his markets. They may be aggressive in attempting to locate new customers or to --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------aim to accomplish two things:
1. Allow startup ice cream --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------their bank account which could put them out of business. This is in effect, ---------------------------------------- distributor's market and customer base.
2. By tracking who pays, and when, the distributor can see potential problems developing and take steps to reduce or increase the allowed --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ice cream delivered.
New businesses often have trouble --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------financial institutions. Many new companies have worked within these constrains by utilizing trade credit – receiving products or services in return for a promise to pay the supplier within a set amount of time – rather than --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------credit can help companies get on their feet and begin to establish business credit. In exchange, suppliers may earn new business – and loyalty – from startup clients.
Buying on Trade Credit-
There are several possible --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------traditional lenders to finance. Trade credit is usually offered without interest charges, so long --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------profit off of fees.
Merchants who can defer payment --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------a third-party, like a bank, probably couldn’t control.
Finally, suppliers who report --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as trade references*, and are one of the factors many business credit bureaus may --------------------------------------------------------------------------- financial reliability.
It’s important to note that these --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------their purchases directly through the supplier. Trust between owners – and the possibility of a discount – could make other lenders less attractive.
What are some downsides of --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------relationships and negatively affect a company’s reputation, so it’s imperative to keep obligations in line with the ability to pay.
Extending Trade Credit-
There are a number ------------------------------------------------------------------- can benefit established suppliers.
Customers who --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------increase their profit margins.
Extending credit can also improve --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Businesses start small, but successful partners may increase their orders down the road. In the best-case scenario, a relatively small risk can pay off with substantial, long-term benefits.
Business credit bureaus like --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------yet established business credit scores and ratings, consumer credit bureaus may be able to provide insights into the owner’s financial history.
Having as much information as ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- credit agreement.
While extending credit has --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in the unfortunate position of having to pursue bad debts, which distracts from the business’s day-to-day --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for lenders to keep their potential losses manageable.
Whether you’re receiving or extending --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for early payments, and is restricted to businesses.
Trade credit terms are often expressed in shorthand. For example, “2/10/30? or “--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------must be paid no later than 30 days after the invoice is issued.
Since it doesn’t us-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- and lines of credit.
Trade credit has helped --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------expert or attorney before opening or offering a trade credit account.
The Cost of Trade Credit (Accounts Payable)-
Small businesses --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and other types of goods that are necessary to operate the business.
It is estimated by most experts ----------------------------------------------------------------------------------------------------------------------------------------------------------------------of their financing from trade credit -- what they owe their suppliers.
It is certainly the single --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as a current liability.
How Does Trade Credit Work?
When a company buys --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to the company. This credit becomes a source of working capital financing for the company. For very small --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the companies that hold credit with them.
Pick Your Suppliers Carefully
When your business --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------but also for their terms of trade credit.
If you --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------credit terms.
When you are choosing suppliers, --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------inventory you anticipate needing going forward into the future.
You want to make your company --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------be with regard to the terms of trade credit with that supplier.
The Cost of Trade Credit
That said, there is a cost associated --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the effective cost of what you purchase from the suppliers is often --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------cost of trade credit.
Firms that offer your company --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------this: 2/10, net 30. This means that the supplier will offer you a 2 percent discount if you pay --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, what do they mean?
An Example of the Real Cost of Trade Credit Here we can use a formula to calculate the cost of trade credit.
This formula is also called the --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to take that 2 percent discount. In other words, you do not have the cash flow to pay the bill and receive the discount within 10 days, what is this going to cost you?
Here is the formula to calculate the cost of not taking the discount:
Discount Percentage ---------------------------------------------------------------------- days - Discount days)]
Here's a step-by-step explanation of the formula using the example given above: 2/10 net 30.
1. Divide --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2.0408%
2. Divide 360 -- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- This equals 18.
3. Multiply the ------------------------------------------- 36.73%, the real annual interest rate charged.
According --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------rate than that.
Should Your Company Use Trade Credit?
Should your company --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, then yes. However, you should calculate the cost of trade credit, or the cost of not taking the discount, as in the section above.
If you do not have the cash flow to --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------take the discount.
4. The management of Royal Industries has called for a statement showing the working capital to finance a level of activity of 1,80,000 units of output for the year. The cost structure for the company’s product for the above mentioned activity level is detailed below:
Additional information: (a) Minimum desired cash balance is Rs. 20,000. (b) Raw materials are held in stock, on an average, for two months. (c) Work-in-progress (assume 50% completion stage) will approximate to half- a-month’s production. (d) Finished goods remain in warehouse, on an average, for a month. (e) Suppliers of materials extend a month’s credit and debtors are provided two month’s credit; cash sales are 25% of total sales. (f) There is a time-lag in payment of wages of a month; and half-a-month in the case of overheads. From the above facts, you are required to prepare a statement showing working capital requirements.
Solution-
As the estimates are to be submitted to the management, only cash costs are to be considered.
5. Discuss the critical decisions that you need to take in working capital management. Emphasize the important ways in which those decisions differ from those concerned with the management of the fixed capital of a business.
Concept of working capital includes -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. For getting good profits from fixed assets, we need to buy some current assets or pay some expenses or invest our money in current assets. For example, we keep some of cash which is the one of major part of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, our production may delay. Like this, we need inventory or to invest in debtors and other short term securities.
1. Gross -------------------------------- Capital
According to gross -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. Current assets are those assets which can be converted into cash within the short-time period.
Gross Working Capital = Total current assets
In this way, gross working -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, prepaid expenses, bills receivable etc.
2. Net Concept Of Working Capital
According to the net concept, working -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------net working capital.
Net Working Capital = --------------------- - Current liabilities
Operating Cycle Concept of Working Capital In this concept of working -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------our inventory. We also calculate debtor or receivable conversion period. To know this, we can estimate when we receive cash from our debtors. If inventory conversion period is less than -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------conversion period.
Critical ------------------------------------------------- capital management- The main considerations of working capital management decisions are (1) Cash flow/ liquidity and (2) profitability/return on capital. Working capital ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- (current assets), and cash requirements (current liabilities). As a result, the decisions relating to working capital are always current (i.e., short-term decisions). In addition to the time horizon, working capital decisions differ from capital -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------not made on the same basis as long-term decisions, and working capital management -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the most important). 1. Cash Conversion Cycle (CCC)- One measure of cash flow is -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------this metric makes explicit the interrelatedness of decisions regarding inventories, accounts receivable and -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------aims at a low net count.
Cash cycle Cash conversion cycle is a main criteria for working capital management.
2. Return On Capital (ROC)- In this context, the most -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------return on equity (ROE) shows this result for the firm's shareholders. Firm value is enhanced when, and if, the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------are, therefore, useful as a management tool, in that they link short-term policy with long-term decision making. Credit policy- Another factor affecting working -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the cash conversion cycle.
There are several techniques that can be adopted by companies to manage the working capital such as:
1. Cash management – one ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- not increased
2. Inventory management – Managing -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------manage the working capital. Learn more about JIT and economic order quantity in our course on supply chain management for business efficiency.
3. Debtor’s management – This ------------------------------------, managing discounts and allowances etc.
4. Short-term financing – Depending on -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------on our working capital
If you are aspiring to be an -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the working capital for your business. In short, managing the working capital cycle of your business is crucial to its long-term growth and success.
Important ways in -------------------------------------------------------------------------------------------------------------------------------------------------------------------- the management of the fixed capital of a business.
8 important factors affecting the requirement of fixed capital
(1) ------------------------------of Business:
Need of fixed capital depends -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------investment is made in land, building, machinery, etc.
Thus, there is a need for -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital is needed.
(2) Scale -----------------------------------:
Larger the spread of business -------------------------------------------------------------------------------------------------------------------------------------------------------------------manufacturing enterprise will need relatively more amount of fixed capital.
(3) Choice of Technique:
Those manufacturing -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------through manual labour need for fixed capital is very little.
(4) Technology -----------------------:
There are some -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------business is computer based need more fixed capital.
(5) Growth Prospects:
There are two types of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------organizations which have more possibilities of growth. They need more additional fixed capital. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- available.
(6) Diversification:
Diversification means -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------fixed capital. For example, if a textile manufacturing company starts the business of paper ---------------------------------------------------, etc. Therefore, it will require more additional fixed capital.
Leasing is a sort of contract under ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------. On the expiry of the period of the lease, the property is returned to the owner. Sometimes, when the lease ends, the lesser gives the lessee the option to buy the property or get it on lease again.
(7) Financing Alternatives:
Generally, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, etc.).
However, another source -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. In such a situation the need for fixed capital decreases.
(8) Level of Collaboration:
It means seeking the help of other organizations in order to run business. For example, if a bank gets the ATM of another bank, this is called collaboration. -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------that collaboration helps reducing the need for fixed capital.
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