Economic
order quantity (EOQ) is a decision tool used in cost
accounting. It’s a formula that allows you to calculate the ideal quantity of
inventory to order for a given product
Economic order quantity uses three variables:
demand
relevant ordering cost
relevant carrying cost.
·Demand: The
demand, in units, for the product for a specific time period.
·Relevant
ordering cost: Ordering cost per purchase order.
·Relevant
carrying cost: Carrying costs for one unit. Assume the unit is in stock for
the time period used for demand.
Note that the ordering cost is calculated per order.
The carrying costs are calculated per unit. Here’s the formula for economic
order quantity:
Economic order quantity = square
root of [(2 x demand x ordering costs) ÷ carrying costs]
Q is the economic order quantity (units). D is demand (units,
often annual), S is ordering cost (per purchase order), and H is carrying cost
per unit.
FINANCIAL MANAGEMENT IMPORTANT KEY TERMS • Common shareholder • Preferred shareholder • Bonds • Debenture • Financial market • Cost of money • Banking and non banking sector • Stock market • Capital • Budgeting • Dividend policy • financial report • Long and short term financing • Inventory management Common shareholders - Common shareholders are the owner of company and as such they have certain rights. They have the right to elect the director of the company. - In the small firm common shareholder hold the position of the company chairman and also hold the elections of directors periodically (once in a year). - Each share holder has one vote. Preferred Shareholder - It is similar with the bondholder in some respect. - ...
Financial Management The decision making on the basis of money is known as financial management. Two basic aspects of financial management 1- Procurement of funds 2- Utilization of funds PROCUREMENT FUNDS Procurement of funds means from where we can get the money for the use or to run a business. We can also say that from where we can get the money to fulfill our needs. Sources of procurement of funds 1- Debenture and bond : it is type of a certificate issues by the company in the form of bond. Debenture : It is unsecured type of bond. If the company goes to corrupt then they have to first pay the debenture bonds. BONDS : long term contract. Generally issues for the 20-30 years in long term period and for the 7-10 years in the in short term period. This is offered to general public through the advertised in the newspaper. ...
WORKING CAPITAL MANAGEMENT Working capital is a requirement of funds to company to meet day to day expenses. Some time liquidity (a currency of money that people have in their pocket is known as liquidate ) is very less and unable to meet. It is also known as current assets and current liabilities. There are three conditions to identify the working capital · If current asset are more the then current liabilities then you are doing good and working capital is high · If current asset are less the then current liabilities then you are doing poor and working capital is low · If current asset are equal to the then current liabilities then you are doing fine and working capital is equal Without working capital an enterprise is failed. For that you need money to run your business and fulfill the daily needs.
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