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Effect on Working Capital

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Guest

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Guest (Querist)
17 December 2009 Does provision for doubtful debts and provision for discount on debtors has any effect on working capital? If yes, can u plz explain how it affects?

Thank you
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Rasesh

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Rasesh (Expert)
17 December 2009 If you have not made the provision, then the Debtors would include an amount which is not recoverable. Such debtors artificially keep your working capital requirements at a higher level.

Once a provision has been made and the debtors' reduced to that extent, the actual picture gets reflected in your working capital cycle.
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