UK Efficient level of working capital

[Na1]

Hi Everyone,

I'd appreciate some help with the following issue:

For a business with excess cash, they need to calculate the most efficient level of working capital so that they can remove excess cash for investment or as payment to shareholders. Does anyone have any advice on how to calculate how much cash / working capital should be retained?

Thanks in advance for your help.

 

[kirby]

This is unique to your business and your industry. Example, if you were in banking you might have ONLY many small depositors or a bank with several HUGE depositors. So the point is: your cash flow will vary based on your customer base UNIQUE to your company. It follows that the amount of cash to hold will vary also. So look to past results and cash levels at your company as well as information from your cash forecasting process. And if you find cash position varies significantly, you had better get a line of credit from a bank to cover short-term cash shortfalls.