Purchase Solution

Fixed and Working Capital Investment Drivers

Not what you're looking for?

Ask Custom Question

What factors are likely to drive a firm's outlays for new capital (such as plant, property, and equipment) and for working capital (such as receivables and inventory)? What ratios would you use to help generate forecasts of these outlays?

Purchase this Solution
Solution Summary

690 words, APA

Solution Preview

The response addresses the queries posted in 830 words with references.

//Before describing about the Driving factors of firm's outlays for new fixed capital and for working capital, it is essential to gain knowledge about the significance of Investment decisions for the business. One should know about the impact of these decisions on the business activities.//

Investment decisions, whether it is related to fixed capital or working capital, are of vital significance in financial decision making. In the first place, profitability of a firm is affected by these decisions. Competitive position of the enterprise had also been bared by these decisions mainly because of the fact that they relate to fixed assets. (Khan & Jain, 2002) The fixed assets represent, in a sense, the true earning assets of the firm. To generate finished goods, the firms are enabled by them that can ultimately be sold for profit. These decisions are of considerable significance as the future success and growth of the firm depends heavily on them. (Khan & Jain, 2002)

//Above is the discussion of significance of Investment decisions for the business and their impact. Moving to the next direction, explanation about the Driving factors of firm's outlays for new fixed capital and for working capital is to be discussed.//

Driving factors of firm's outlays for new fixed capital and ...

Solution provided by:
Ashish Sharma, MBA (IP)
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
Recent Feedback
  • "Thank You so much! "
  • "Always provide great help, I highly recommend Mr. Sharma over others, thanks again. "
  • "great job. I will need another help from you. "
  • "first class!"
  • "Thank you for your great notes. Will you be willing to help me with one more assignment? "
Purchase this Solution
Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

View More Free Quizzes
Related BrainMass Solutions

  • Need to answer the following question

    Generally, companies should emphasize the value of working capital and fixed capital investment management.

  • Rappaport's elegant shareholder valuation model

    This shareholder valuation model by Rappaport includes: Here, S(t-1)=Sales in the prior year g=growth rate in sales m=Profit Margin T=Tax rate w=Working capital requirement, and f=Fixed asset investment as a percentage of sales According to

  • The Implications of Liberal Credit Terms to Customers

    Alfred Rappaport's model, for example, uses six variables or drivers--sales growth rate, operating profit margin, tax rate, working capital investment, capital expenditures, and the cost of capital.

  • Forecasting, Break Even, Working Capital, Business Plans

    working capital = Sales x investment in net working capital percentage (e.g., $1,000,000 x .21 = $210,000) You may use the following Table to calculate investment in net working capital: Table 1: Investment in Net Working Capital.

  • Initial investment outlay

    What is the projects initial investment outlay? Project's Initial investment outlay comprises the investments done in the beginning of the project. This includes Investments in Fixed assets and net working capital.

  • Problem on working capital

    Projected fixed assets and current liabilities are $20 million and $18 million, respectively. Sales and EBIT are partially a function of the company's investment in working capital particularly its investment in inventories and receivables.

  • Cash Flow Breakeven Point

    To answer question 2, you may consider using the following additional help: Required investment to undertake project (total investment): Fixed investment for 1st five years + maintenance expenditures + average net working capital Investment in net working

  • Expansion Project - Buck Inc

    The solution computes Sales Revenue, Cost of Goods Sold, Fixed Operating Expense (SGA), Depreciation Expense, EBIT, Taxes, Net (Operating) Income, Operating Cash Flow, Capital Investment & Net Salvage, Net Working Capital (NWC) Investment , Free Cash

  • Capital Budgeting

    4 Year 5 $4,000,000 $5,000,000 $5,000,000 $5,500,000 $5,000,000 Variable costs: 60% of sales Fixed costs: $500,000 Annual depreciation charge for equipment: $400,000 Investment in net working capital: 10% of next year increase in

View More Related Solutions