Question

If a manufacturing company work for 300 days per year(so not working whole 365 days), are their any adjustments to consider when calculating working capital requirement?

Answer 1

yes, adjustment to be considered while calculating working capital requirement.

For example, when we estimate working capital based on operating cycle, we take Cost of Goods Sold on proportion basis ( i.e., proportionate of : No of days in operating cycle divided by 365 days). Here, in the state calculation we should repalce 365 days with 300 days.

The reason for such replacement is the period of operating cycle does not include number of holidays hence denominator( i.e., No of days in a year) also should exclude number of holidays.