ROLE OF TURNOVER INDICATORS IN PLANNING FOR WORKING CAPITAL NEEDS OF AN ENTITY

Abstract

The objective of this paper is to present methods for determining a target amount of working capital on the basis of turnover indicators. It is to differentiate among them: net operating cycle, cost approach or cost participation in revenues method. On the other hand, planning for working capital requirements needs for costs and revenues estimates. The distribution of costs into variable and fixed elements implies forecasts possibilities. In the first case Excel’s algorithm “Add trend line” was used to construct non-linear trend curves. The latter were predicted based upon average values, showing the mean level of the phenomenon over time.