Alternative working capital policy Essay Example | Topics and Well Written Essays - 750 words

Alternative working capital insurance policy - Essay Examplebtain documentation through this method is that EHC should have an average operating margin greater then 0% everywhere the last three years along with a debt coverage ratio greater than 1.25x. the third filling is to go for sourcing investment from private banks, which obviously come with a higher rate of interest (4.50%) compared to the separate available options. Further, there is a difference in prepayment limitations in this quality at 2% of the headspring amount.The inflow from operating activities totaled nearly $50 one million million. However, the high operating expenses to the tune of $40 million means that EHC is left with a mere $497,000 in terms of net income. This is insufficient to fund the proposed magnification worth $75 million nor is it adequate to manage the related loan repayment pluss in case the required funds are sourced from outside.The cash conversion cycle ( three hundred) will help determ ine the purpose up to which EHC will not be able to seek cash in case an increase in investment towards expansion is initiated in a bid to offer a wider range of services. CCC is this a measurement of the liquidity risk associated with any proposed initiative towards growth.Clearly, CCC is negative which means EHS is super dependent on collecting cash from customers before paying suppliers and for the maintenance of equipment. Although this represents a strict policy of collections, this approach is not sustainable in the long run and the company will not be able to consider any expansion in this setup.Amongst the three options available, it is recommended to opt for low tax tax income bonds as it comes with a manageable rate of interest and moreover, such bonds come from governmental bodies, thereby having the least(prenominal) risk associated with them. the advantage of a revenue bond also arises from the fact that repayment is done whole from the revenues generated by the ne w expansion, which will facilitate easy book keeping and have the least lure on EHCs management of existing