Answer to Question #119531 in Accounting for Aditya Manohar

Question

khadi and village industries, being a part of MSME were facing some issues related to sales with big brand apparel industry competitors. the length of production is small and labour intensive whereas the inventory holding period and average collection are huge. Reducing operations is also not a way to deal in this solution.You are appointed as a finance manager in the company to deal with the problem of working capital management. You further faces the problem of compromising between liquidity and profitability. What strategies you would adopt as finance manager to solve this problem

Answer 1

If you are appointed as a finance manager in the company, then you should increase liquidity, and decrease inventory holding period and average collection. You can do the next steps: early invoice submission, switch from short-term debt to long-term debt, get rid of useless assets, control your overhead expenses, and negotiate for longer payment cycles.