Question

circumstances under which public financal management will allow the procurement of goods, works and services and the benefits it comes with it

Answer 1

1a)Money touches everything we do. Money is behind most everything we see cach day. We don't physically observe the money behind a building or a new car or a house, but it is there. Without it most of the things we see wouldn't exist. W. Somerset Maugham (world famous writer) says, "Money is like a sixth sense without which you cannot make a complete use of the other five". Henry Ford once remarked "Money is an arm or a leg. You either use it or lose it". So everyone worries about money - how to get it and how to use it.

Every enterprise, whether big, medium or small, needs finance to carry on its operationn and to achieve its goals. Finance is quite essential for starting and operating a business enterprise. It is rightly described as the life blood of business.

The word finance comes from an old French word 'fine'. It means to pay, settle, or finis.h. Finance is the art and science of handling money. It is the management of money. It is the management of flows of money through an organization. However, finance is different from money. Finance may be defined as the provision of money at the time when it is needed.

According to Eneyelopedia of Britannica, "finance is an act of providing means of payment". In the words of Prather and Wert, "financing consists of raising, providing, managing of all the money, capital, funds of any kind to be used in connection with business".

The investment decision is a improtant factor for procurement goods,works and services.the Investment Decision / Capital Budgeting The term capital budgeting is a combination of two terms, namely, capital and budgeting. Capital refers to the long term investment in business. Budgeting refers to planning for long term capital requirements. Thus capital budgeting refers to the selection of proposals or projects for making long term investment. Capital budgeting simply refers to investment decisions. It is the process of allocating the resources of the organisation in the long term investment projects to generate profits. In the words of R.M.Lynch, "capital budgeting consists in planning the employment of available capital for the purpose of maximising the long term profitability of the firm". Thus, capital budgeting is a process of long range planning involving investments of funds in long term activities whose benefits are expected over a series of years. In short, capital budgeting is the process of planning and control of capital expenditure.

there are number of appraisal criteria to judge the capital projects.so the evaluation methods helps to financial management for take decision against procurement of goods,works and services.Those improtant and popular of these can be classified into two broad categories as follows:

1. Non-Discounting Techniques or Traditional methods

a) Urgency method

b) Pay back method

c) Average rate of return method

2. Discounting Criteria or Modern methods

a) Discounted pay back method

b) Net present value method

c) Benefit Cost ratio

d) Internal rate of return

e) Modified internal rate of return

f) Net terminal value method

These techniques helps to make optimal capital structure.the optimal capital structure is determined by taking into consideration financial leverage,cost of capital and value of firm.

and next needed to estimation working capital requirement,

A business enterprise requires not only fixed assets but also current assets for its efficient functioning. Current assets are required to make effective utilisation of fixed assets. The amoungt invested in fixed assets is calléd fixed capital (long term or block capital). The amount invested in current assets is known as working capital (short term capital). Thus a business enterprise requires two types of capital, namely, fixed capital and working capital.

Working capital is the capital required for the day-to-day working of an enterprise. It is required for the purchase of raw materials and for meeting the day-to-day expenditure on salaries, wages, rents, advertising etc. It is needed for holding some convertible assets (current assets) such as stock, book debts, bills receivable and cash. The firm operates its business through these assets. These assets are convertible in the sense that these change from one form of asset to another, Cash is converted into raw materials, raw materials into work in progress, work in progress into finished goods, finished goods into book debts and bills receivable and then book debts and bills receivable into cash. Thus the amount goes on circulating or revolving from cash to current assets and current assets to cash. That is why working capital is also called circulating capital or revolving capital or floating capital or liquid capital. It is also known as operating capital.

The concept of working capital was, perhaps, first evolved by Karl Marx. But he used the term "variable capital". Karl Marx defined working capital as variable capital consisting of wage fund.

According to Shubin, "working capital is the amount of funds necessary to cover the cost of operating the enterprise".

Working capital is the difference between inflow and outflow of funds. In other words, it is the net cash inflow. It is the assets and liabilities required to operate a business on day to day basis.

Estimation of Working Capital Requirement-: Working capital is the life blood and the controlling nerve centre of a business. No business can be successfully run without adequate amount of working capital. Hence it becomes essential to forecast the required amount of working capital in the future so that there is no difficulty in procuring the working capital. But it is not easy to estimate the working capital requirement. A large number of factors will have to be considered while estimating the working capital required. In case of a manufacturing company, the following factors should be taken into consideration:

(a) Total cost incurred on material, wages and overheads.

(b) The length of time for which raw materials are to remain in stores before they are issued for production.

(c) The length of the production cycle or work in progress (i.e., the time taken for the conversion of raw materials into finished goods).

(d) The length of the sales cycle during which finished goods are to be kept waiting for sale.

(e) The average period of credit allowed to customers.

f)The amount of cash required to pay for day-to-day expenses.

(g) The average amount of cash required to make advance payments,

(h) Time lag in payment of wages and other expenses.

i)The average period of credit allowed by suppliers.

j) Amount to be provided for contingencies.

Methods of Estimating Working Capital Requirement .

Following methods are generally used in estimating working capital requirement:

(i) Net current asset forecasting method

(ii) Operating cycle method

(iii) Projected Balance Sheet method

(iv) Adjusted Profit and Loss Account method

(v) Cash Flow Forecast method

and next analayze the financial statement,that was helpto understand the financial position of the company.basically ratio calculation is used for analyze the financial position of busniess.

Which managemnt keep going on correct way,that financial managemnt easily handle the goods,works and services.financial management have a life cycle ,it includes investment decision,financial decision,dividend decision,estimation of working capital and management of cash receivables.financial management of business is needed to pass the all areas of the life cycle so that helps to keep a good profitability.so which financial management is pass the life cycle ,that have the strength for procurement of goods,service and works.

Thanking You.....!