To calculate the Need of Funds (NOF):
\[ NOF = \text{Operating Cash} + \text{Inventories} + \text{Accounts Receivable} - \text{Accounts Payable} \]
Where:
The operating needs for funds (NOF) is the money necessary to carry out business activities (current assets). NOF indicates how much investment in working capital (i.e., cash and immediately liquid assets) a company needs to cover operating expenses and develop its activities. When NOF is positive, it indicates that the asset needs to be financed. Conversely, a negative NOF indicates that customers are financing the company's operations and growth.
Let's assume the following values:
Using the formula:
\[ NOF = 0 + 50000 + 30000 - 20000 = 60000 \text{ monetary units} \]
The Need of Funds (NOF) is 60,000 monetary units.
Let's assume the following values:
Using the formula:
\[ NOF = 0 + 75000 + 45000 - 90000 = 30000 \text{ monetary units} \]
The Need of Funds (NOF) is 30,000 monetary units.
