A.

Investment Decision (Capital Budgeting Decision):

This decision relates to careful selection of assets in which funds will
be invested by the firms. A firm has many options to invest their funds
but firm has to select the most appropriate investment which will
bring maximum benefit for the firm and deciding or selecting most
appropriate proposal is investment decision.

ADVERTISEMENTS:

The firm invests its funds in acquiring fixed assets as well as current
assets. When decision regarding fixed assets is taken it is also called
capital budgeting decision.

Factors Affecting Investment/Capital Budgeting Decisions

1. Cash Flow of the Project:

Whenever a company is investing huge funds in an investment
proposal it expects some regular amount of cash flow to meet day to
day requirement. The amount of cash flow an investment proposal will
be able to generate must be assessed properly before investing in the
proposal.

2. Return on Investment:
The most important criteria to decide the investment proposal is rate
of return it will be able to bring back for the company in the form of
income for, e.g., if project A is bringing 10% return and project В is
bringing 15% return then we should prefer project B.

3. Risk Involved:
With every investment proposal, there is some degree of risk is also
involved. The company must try to calculate the risk involved in every
proposal and should prefer the investment proposal with moderate
degree of risk only.

4. Investment Criteria:
Along with return, risk, cash flow there are various other criteria
which help in selecting an investment proposal such as availability of
labour, technologies, input, machinery, etc.

The finance manager must compare all the available alternatives very
carefully and then only decide where to invest the most scarce
resources of the firm, i.e., finance.

Investment decisions are considered very important decisions because

of following reasons:

(i) They are long term decisions and therefore are irreversible; means
once taken cannot be changed.

ADVERTISEMENTS:

(ii) Involve huge amount of funds.

(iii) Affect the future earning capacity of the company.

B. Importance or Scope of Capital Budgeting Decision:

Capital budgeting decisions can turn the fortune of a company. The
capital budgeting decisions are considered very important because of
the following reasons:
1. Long Term Growth:
The capital budgeting decisions affect the long term growth of the
company. As funds invested in long term assets bring return in future
and future prospects and growth of the company depends upon these
decisions only.

2. Large Amount of Funds Involved:

Investment in long term projects or buying of fixed assets involves
huge amount of funds and if wrong proposal is selected it may result
in wastage of huge amount of funds that is why capital budgeting
decisions are taken after considering various factors and planning.

3. Risk Involved:
The fixed capital decisions involve huge funds and also big risk
because the return comes in long run and company has to bear the risk
for a long period of time till the returns start coming.

4. Irreversible Decision:
Capital budgeting decisions cannot be reversed or changed overnight.
As these decisions involve huge funds and heavy cost and going back
or reversing the decision may result in heavy loss and wastage of
funds. So these decisions must be taken after careful planning and
evaluation of all the effects of that decision because adverse
consequences may be very heavy.

C. Financing Decision:
The second important decision which finance manager has to take is
deciding source of finance. A company can raise finance from various
sources such as by issue of shares, debentures or by taking loan and
advances. Deciding how much to raise from which source is concern of
financing decision. Mainly sources of finance can be divided into two
categories:

1. Owners fund.

2. Borrowed fund.

Share capital and retained earnings constitute owners’ fund and

debentures, loans, bonds, etc. constitute borrowed fund.

The main concern of finance manager is to decide how much to raise

from owners’ fund and how much to raise from borrowed fund.

While taking this decision the finance manager compares the

advantages and disadvantages of different sources of finance. The
borrowed funds have to be paid back and involve some degree of risk
whereas in owners’ fund there is no fix commitment of repayment and
there is no risk involved. But finance manager prefers a mix of both
types. Under financing decision finance manager fixes a ratio of owner
fund and borrowed fund in the capital structure of the company.

Factors Affecting Financing Decisions:

While taking financing decisions the finance manager keeps in mind
the following factors:

1. Cost:
The cost of raising finance from various sources is different and
finance managers always prefer the source with minimum cost.
2. Risk:
More risk is associated with borrowed fund as compared to owner’s
fund securities. Finance manager compares the risk with the cost
involved and prefers securities with moderate risk factor.

3. Cash Flow Position:

The cash flow position of the company also helps in selecting the
securities. With smooth and steady cash flow companies can easily
afford borrowed fund securities but when companies have shortage of
cash flow, then they must go for owner’s fund securities only.

4. Control Considerations:
If existing shareholders want to retain the complete control of
business then they prefer borrowed fund securities to raise further
fund. On the other hand if they do not mind to lose the control then
they may go for owner’s fund securities.

5. Floatation Cost:
It refers to cost involved in issue of securities such as broker’s
commission, underwriters fees, expenses on prospectus, etc. Firm
prefers securities which involve least floatation cost.

6. Fixed Operating Cost:

If a company is having high fixed operating cost then they must prefer
owner’s fund because due to high fixed operational cost, the company
may not be able to pay interest on debt securities which can cause
serious troubles for company.

7. State of Capital Market:

The conditions in capital market also help in deciding the type of
securities to be raised. During boom period it is easy to sell equity
shares as people are ready to take risk whereas during depression
period there is more demand for debt securities in capital market.

D. Dividend Decision:
This decision is concerned with distribution of surplus funds. The
profit of the firm is distributed among various parties such as
creditors, employees, debenture holders, shareholders, etc.

Payment of interest to creditors, debenture holders, etc. is a fixed

liability of the company, so what company or finance manager has to
decide is what to do with the residual or left over profit of the
company.

The surplus profit is either distributed to equity shareholders in the

form of dividend or kept aside in the form of retained earnings. Under
dividend decision the finance manager decides how much to be
distributed in the form of dividend and how much to keep aside as
retained earnings.

To take this decision finance manager keeps in mind the growth plans
and investment opportunities.

If more investment opportunities are available and company has

growth plans then more is kept aside as retained earnings and less is
given in the form of dividend, but if company wants to satisfy its
shareholders and has less growth plans, then more is given in the form
of dividend and less is kept aside as retained earnings.
This decision is also called residual decision because it is concerned
with distribution of residual or left over income. Generally new and
upcoming companies keep aside more of retain earning and distribute
less dividend whereas established companies prefer to give more
dividend and keep aside less profit.

Factors Affecting Dividend Decision:

The finance manager analyses following factors before dividing the net
earnings between dividend and retained earnings:

1. Earning:
Dividends are paid out of current and previous year’s earnings. If there
are more earnings then company declares high rate of dividend
whereas during low earning period the rate of dividend is also low.

2. Stability of Earnings:
Companies having stable or smooth earnings prefer to give high rate of
dividend whereas companies with unstable earnings prefer to give low
rate of earnings.

3. Cash Flow Position:

Paying dividend means outflow of cash. Companies declare high rate
of dividend only when they have surplus cash. In situation of shortage
of cash companies declare no or very low dividend.

4. Growth Opportunities:
If a company has a number of investment plans then it should reinvest
the earnings of the company. As to invest in investment projects,
company has two options: one to raise additional capital or invest its
retained earnings. The retained earnings are cheaper source as they do
not involve floatation cost and any legal formalities.

If companies have no investment or growth plans then it would be

better to distribute more in the form of dividend. Generally mature
companies declare more dividends whereas growing companies keep
aside more retained earnings.

5. Stability of Dividend:
Some companies follow a stable dividend policy as it has better impact
on shareholder and improves the reputation of company in the share
market. The stable dividend policy satisfies the investor. Even big
companies and financial institutions prefer to invest in a company
with regular and stable dividend policy.

There are three types of stable dividend policies which a

company may follow:
(i) Constant dividend per share:
In this case, the company decides a fixed rate of dividend and declares
the same rate every year, e.g., 10% dividend on investment.

(ii) Constant payout ratio:

Under this system the company fixes up a fixed percentage of
dividends on profit and not on investment, e.g., 10% on profit so
dividend keeps on changing with change in profit rate.

(iii) Constant dividend per share and extra dividend:

Under this scheme a fixed rate of dividend on investment is given and
if profit or earnings increase then some extra dividend in the form of
bonus or interim dividend is also given.

6. Preference of Shareholders:
Another important factor affecting dividend policy is expectation and
preference of shareholders as their expectations cannot be ignored by
the company. Generally it is observed that retired shareholders expect
regular and stable amount of dividend whereas young shareholders
prefer capital gain by reinvesting the income of the company.

They are ready to sacrifice present day income of dividend for future
gain which they will get with growth and expansion of the company.

Secondly poor and middle class investors also prefer regular and
stable amount of dividend whereas wealthy and rich class prefers
capital gains.

So if a company is having large number of retired and middle class

shareholders then it will declare more dividend and keep aside less in
the form of retained earnings whereas if company is having large
number of young and wealthy shareholders then it will prefer to keep
aside more in the form of retained earnings and declare low rate of
dividend.

7. Taxation Policy:
The rate of dividend also depends upon the taxation policy of
government. Under present taxation system dividend income is tax
free income for shareholders whereas company has to pay tax on
dividend given to shareholders. If tax rate is higher, then company
prefers to pay less in the form of dividend whereas if tax rate is low
then company may declare higher dividend.

8. Access to Capital Market Consideration:

Whenever company requires more capital it can either arrange it by
issue of shares or debentures in the stock market or by using its
retained earnings. Rising of funds from the capital market depends
upon the reputation of the company.

If capital market can easily be accessed or approached and there is

enough demand for securities of the company then company can give
more dividend and raise capital by approaching capital market, but if
it is difficult for company to approach and access capital market then
companies declare low rate of dividend and use reserves or retained
earnings for reinvestment.

9. Legal Restrictions:
Companies’ Act has given certain provisions regarding the payment of
dividends that can be paid only out of current year profit or past year
profit after providing depreciation fund. In case company is not
earning profit then it cannot declare dividend.

Apart from the Companies’ Act there are certain internal provisions of
the company that is whether the company has enough flow of cash to
pay dividend. The payment of dividend should not affect the liquidity
of the company.

10. Contractual Constraints:

When companies take long term loan then financier may put some
restrictions or constraints on distribution of dividend and companies
have to abide by these constraints.

11. Stock Market Reaction:

The declaration of dividend has impact on stock market as increase in
dividend is taken as a good news in the stock market and prices of
security rise. Whereas a decrease in dividend may have negative
impact on the share price in the stock market. So possible impact of
dividend policy in the equity share price also affects dividend decision.

In corporate finance, a debenture is a medium to long-term debt instrument used by large

companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred
to a document that either creates a debt or acknowledges it, but in some countries the term is now
used interchangeably with bond, loan stock or note.[1] A debenture is thus like a certificate of loan
or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest
and although the money raised by the debentures becomes a part of the company's capital
structure, it does not become share capital.[2] Senior debentures get paid before subordinate
debentures, and there are varying rates of risk and payoff for these categories.
Debentures are generally freely transferable by the debenture holder. Debenture holders have no
rights to vote in the company's general meetings of shareholders, but they may have separate
meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to
them is a charge against profit in the company's financial statements.
The term "debenture" is more descriptive than definitive. An exact and all-encompassing definition
for a debenture has proved elusive. The English commercial judge, Lord Lindley, notably remarked
in one case: "Now, what the correct meaning of ‘debenture’ is I do not know. I do not find anywhere
any precise definition of it. We know that there are various kinds of instruments commonly called
debentures.
Working capital is a measure of both a company's efficiency and its short-term financial
health. Working capital is calculated as:

Working Capital = Current Assets - Current Liabilities

Requirements Of working capital depend upon various factors such as nature of business, size of
business, the flow of business activities. However, small organization relatively needs lesser
working capital than the big business organization. Following are the factors which affect the
working capital of a firm:

1. Size Of Business
Working capital requirement of a firm is directly influenced by the size of its business operation.
Big business organizations require more working capital than the small business organization.
Therefore, the size of organization is one of the major determinants of working capital.

2. Nature Of Business
Working capital requirement depends upon the nature of business carried by the firm.
Normally, manufacturing industries and trading organizations need more working capital than
in the service business organizations. A service sector does not require any amount of stock of
goods. In service enterprises, there are less credit transactions. But in the manufacturing or
trading firm, credit sales and advance related transactions are in large amount. So, they need
more working capital.

3. Storage Time Or Processing Period

Time needed for keeping the stock in store is called storage period. The amount of working
capital is influenced by the storage period. If storage period is high, a firm should keep more
quantity of goods in store and hence requires more working capital. Similarly, if the processing
time is more, then more stock of goods must be held in store as work-in-progress.

4. Credit Period
Credit period allowed to customers is also one of the major factors which influence the
requirement of working capital. Longer credit period requires more investment in debtors and
hence more working capital is needed.But, the firm which allows less credit period to customers
needs less working capital.

5. Seasonal Requirement
In certain business, raw material is not available throughout the year. Such business
organizations have to buy raw material in bulk during the season to ensure an uninterrupted
flow and process them during the entire year. Thus, a huge amount is blocked in the form of raw
material inventories which gives rise to more working capital requirements.

6. Potential Growth Or Expansion Of Business

If the business is to be extended in future, more working capital is required. More amount of
working capital is required to meet the expansion need of business.
 7. Changes In Price Level
Change in price level also affects the working capital requirements. Generally, the rise in price
will require the firm to maintain large amount of working capital as more funds will be required
to maintain the sale level of current assets.

8. Dividend Policy
The dividend policy of the firm is an important determinant of working capital. The need for
working capital can be met with the retained earning. If a firm retains more profit and
distributes lower amount of dividend, it needs less working capital.

9. Access To Money Market

If a firm has good access to capital market, it can raise loan from bank and financial institutions.
It results in minimization of need of working capital.

10. Working Capital Cycle

When the working capital cycle of a firm is long, it will require larger amount of working capital.
But, if working capital cycle is short, it will need less working capital.

11. Operating Efficiency

The operating efficiency of a firm also affects the firm's need of working capital. The operating
efficiency of the firm results in optimum utilization of assets. The optimum utilization of assets
in turn results in more fund release for working capital.

WHAT IS WORKING CAPITAL CYCLE (WCC)?

Working Capital cycle (WCC) refers to the time taken by an organisation to convert its net current
assets and current liabilities into cash. It reflects the ability and efficiency of the organisation to manage
its short-term liquidity position.
In other words, the working capital cycle (calculated in days) is the time duration between buying
goods to manufacture products and generation of cash revenue on selling the products. The shorter
the working capital cycle, the faster the company is able to free up its cash stuck in working capital.
If the working capital cycle is too long, then the capital gets locked in the operational cycle without
earning any returns. Therefore, a business tries to shorten the working capital cycles to improve the
short-term liquidity condition and increase their business efficiency.
The working capital cycle focuses on management of 4 key elements viz. cash, receivables (debtors),
payables (creditors) and inventory (stock). A business needs to have complete control over these four
items in order to have a fairly controlled and efficient working capital cycle. Let as look at an example
to enable a better understanding of the concept of working capital cycle.

WORKING CAPITAL CYCLE EXAMPLE

Let us assume following details for a company that is into the manufacturing sector.

 A company takes raw materials on credit and has to pay back to its creditors in few days (say 30 days in our
example). This is also called as average payables period which is can be calculated as the ratio of creditors to
credit purchases.
Average payable period = average creditors / credit purchases X 365.
This means that the company enjoys a credit period of 30 days on the purchase of raw materials used
for the production of the final good.
 The company takes “x” number of days to sell off its inventory; the “x” here is nothing but inventory turnover
ratio converted into a number of days instead of the number of times. Assuming average inventory of $ 5000
and average sales of $ 18000, the inventory turnover ratio amounts to $ 5000 / $ 18000 X 365 = 102 days
approximately.
 It takes some time for the company to convert its credit sales into cash due to the credit management policy
incorporated by the company in terms of the credit period extended to customers. Assuming outstanding debtors
of $ 9000 and a total credit sale amounting to $ 60,000 the average collection period can be calculated as
Average collection period = average debtors/ Total Credit Sales X 365

= $ 9000 / $ 60000 X 365

= 55 days approximately

Based on the above information, we infer that

 The company has to pay back its creditors in 30 days.

 For inventory to convert to sales, it takes roughly 102 days
 Conversion of receivables (debtors) to cash, on an average, takes 55 days
The working capital cycle for the company can be calculated as given below:
Working Capital Cycle = Inventory turnover in days + debtors turnover in days– creditors turnover

= 102 + 55 -30

= 127 days

This implies that the company has its cash locked in for a period of 127 days and would need funding
from some source to let the operations continue as creditors need to be paid off in 30 days. Assuming
the company had to make all cash payments for its raw material requirement, there wouldn’t be any
creditors and the working capital cycle would then be 102 + 55 = 157 days.

Every company would like to keep its working capital cycle as short as possible. A shorter working
capital cycle can be achieved by focusing on individual aspects of the working capital cycle. Let us
see how this works:

The company can aim to shorten its working capital cycle by:
 Reducing the credit period given to its customers and thereby reducing the average collection period. Giving
cash discount can also help improve the debtor’s turnover ratio or average collection period amid various other
ways.
 The company can try to improve/streamline its process of manufacturing and focus on various ways to increase
sales to reduce the time taken for inventory to convert to sales. The earlier the stock clearance better is the
working capital cycle.
 A better negotiation to increase the credit period from suppliers of raw material and goods required for
production can also aid reduction in the working capital cycle.
While the average collection period and credit period from suppliers aid in shortening the working
capital cycle, the initial prime focus of the business should be to reduce the time taken for inventory to
convert to sales. If the time taken is very long it could imply that the business is not able to generate
sales for the goods produced and more and more capital gets locked in inventory. Either the business
should try and reduce the time or should reduce the amount of inventory thereby reducing the amount
locked in working capital. In other words, if the business is not able to reduce its working capital cycle
and has higher inventory levels, it should aim at reducing inventory levels and reduce the amount
locked in the working capital keeping the cycle time length same.
Most businesses cannot finance the operating cycle (average collection period + inventory turnover in
days) with accounts payable financing alone. This shortfall can be managed by the business either
out of profits accumulated over time, borrowed funds or by both. Let us look at the sources of funding
which can be used to manage the gaps in working capital cycle.

SOURCES OF SHORT-TERM WORKING CAPITAL FINANCING

LINES OF CREDIT
The Company can borrow from banks for a short-term (usually 30 – 60 days) against a line of credit
given by the bank. The same can be paid off once sales proceeds are collected from debtors.

TRADE CREDIT
Often good relations with creditors can be used for extending credit period as one of the cases in
case of a large order and enable financing at a lower cost.

FACTORING
Factoring or discounting of receivables can shorten the working capital cycle and generate cash
however this is usually at a higher cost.
SHORT TERM LOANS
Companies who may not be able to get a line of credit may look for the short-term working capital
loan from a bank.

Having briefly known the sources of working capital financing, let us understand the nature of the
working capital cycle:
The nature or the length of the working capital cycle differs from business to business and varies
among sectors. Working capital cycle in a manufacturing company as seen above in the example is
usually positive as there is a time lag between the goods produced and goods sold (time is taken for
inventory to convert to sales). However, there is a possibility of a negative working capital cycle in
specific businesses.
NEGATIVE WORKING CAPITAL CYCLE
Let us look at the business model of a super market or hyper market chain. The customers who come
to purchase pay by cash and hence there aren’t any debtors or the collection period is 0 days. The
business is a supermarket and hence, all items in the store are taken from vendors and have a credit
period availability to be paid. So usually such businesses enjoy the huge cash and even may make
interest earning on the cash till the money needs to be paid to the suppliers. Therefore, these
companies have a negative working capital cycle.

What is 'Inventory'
Inventory is the raw materials, work-in-process products and finished goods that are
considered to be the portion of a business's assets that are ready or will be ready for
sale. Inventory represents one of the most important assets of a business because
the turnover of inventory represents one of the primary sources of revenue generation
and subsequent earnings for the company's shareholders.
8 Inventory Management Techniques
Inventory management is a highly customizable part of doing business. The
optimal system is different for each company. However, every business
should strive to remove human error from inventory management as much as
possible. This means taking of advantage inventory management software. If
you run your business with Shopify, inventory management is already built in.

Regardless of the system you use, the following eight techniques to will help
you improve your inventory management—and cash flow.

1. Set Par Levels

Make inventory management easier by setting “par levels” for each of your
products. Par levels are the minimum amount of product that must be on
hand at all times. When your inventory stock dips below the predetermined
levels, you know it’s time to order more.

Ideally, you’ll typically order the minimum quantity that will get you back above
par. Par levels will vary by product based on how quickly the item sells, and
how long it takes to get back in stock.

Although it requires some research and decision-making up front, setting par

levels will systemize the process of ordering. Not only will it make it easier for
you to make decisions quickly, it will allow your staff to make decisions on
your behalf.

Remember that conditions change over time. Check on par levels a few times
throughout the year to confirm they still make sense. If something changes in
the meantime, don’t be afraid to adjust your par levels up or down.

2. First-In First-Out (FIFO)

“First-in, first-out” is an important principle of inventory management. It means
that your oldest stock (first-in) gets sold first (first-out), not your newest stock.
 This is particularly important for perishable products so you don’t end up with
unsellable spoilage.

It’s also a good idea to practice FIFO for non-perishable products. If the same
boxes are always sitting at the back, they’re more likely to get worn out. Plus,
packaging design and features often change over time. You don’t want to end
up with something obsolete that you can’t sell.

In order to manage a FIFO system, you’ll need an organized warehouse. This

typically means adding new products from the back, or otherwise making
sure old product stays at the front. If you’re working with a warehousing and
fulfillment company they probably do this already, but it's a good idea to call
them to confirm.

3. Manage Relationships
Part of successful inventory management is being able to adapt quickly.
Whether you need to return a slow selling item to make room for a new
product, restock a fast seller very quickly, troubleshoot manufacturing issues,
or temporarily expand your storage space, it’s important to have a good
relationship with your suppliers. That way they’ll be more willing to work with
you to solve problems.

In particular, having a good relationship with your product suppliers goes a

long way. Minimum order quantities are often negotiable. Don’t be afraid to
ask for a lower minimum so you don’t have to carry as much inventory.

A good relationship isn’t just about being friendly. It’s about good
communication. Let your supplier know when you’re expecting an increase in
sales so they can adjust production. Have them let you know when a product
is running behind schedule so you can pause promotions or look for a
temporary substitute.

4. Contingency Planning
A lot of issues can pop up related to inventory management. These types of
problems can cripple unprepared businesses. For example:

 your sales spike unexpectedly and you oversell your stock

 you run into a cash flow shortfall and can't pay for product you desperately
need
 your warehouse doesn’t have enough room to accommodate your seasonal
spike in sales
 a miscalculation in inventory means you have less product than you thought
 a slow moving product takes up all your storage space
 your manufacturer runs out of your product and you have orders to fill
 your manufacturer discontinues your product without warning
It’s not a matter of if problems arise, but when. Figure out where your risks
are and prepare a contingency plan. How will you react? What steps will you
take to solve the problem? How will this impact other parts of your business?
Remember that solid relationships go a long way here.

5. Regular Auditing
Regular reconciliation is vital. In most cases, you’ll be relying on software and
reports from your warehouse to know how much product you have stock.
However, it’s important to make sure that the facts matche up. There are
several methods for doing this.

Physical Inventory

A physical inventory is the practice is counting all your inventory at once.

Many businesses do this at their year-end because it ties in with accounting
and filing income tax. Although physical inventories are typically only done
once a year, it can be incredibly disruptive to the business, and believe me,
it’s tedious. If you do find a discrepancy, it can be difficult to pinpoint the issue
when you’re looking back at an entire year.

Spot Checking

If you do a full physical inventory at the end of the year and you often run into
problems, or you have a lot of products, you may want to start spot checking
throughout the year. This simply means choosing a product, counting it, and
comparing the number to what it's supposed to be. This isn’t done on a
schedule and is supplemental to physical inventory. In particular, you may
want to spot check problematic or fast-moving products.
 Cycle Counting

Instead of doing a full physical inventory, some businesses use cycle counting
to audit their inventory. Rather than a full count at year-end, cycle counting
spreads reconciliation throughout the year. Each day, week, or month a
different product is checked on a rotating schedule. There are different
methods of determining which items to count when, but, generally speaking,
items of higher value will be counted more frequently.

6. Prioritize With ABC

Some products need more attention than others. Use an ABC analysis to
prioritize your inventory management. Separate out products that require a lot
of attention from those that don’t. Do this by going through your product list
and adding each product to one of three categories:

A - high-value products with a low frequency of sales

B - moderate value products with a moderate frequency of sales
C - low-value products with a high frequency of sales

Items in category A require regular attention because their financial impact is

significant but sales are unpredictable. Items in category C require less
oversight because they have a smaller financial impact and they're constantly
turning over. Items in category B fall somewhere in-between.

7. Accurate Forecasting
A huge part of good inventory management comes down to accurately
predicting demand. Make no mistake, this is incredibly hard to do. There are
so many variables involved and you’ll never know for sure exactly what’s
coming—but you can get close. Here are a few things to look at when
projecting your future sales:

 trends in the market

 last year’s sales during the same week
 this year's growth rate
 guaranteed sales from contracts and subscriptions
 seasonality and the overall economy
 upcoming promotions
 planned ad spend
If there's something else that will help you create a more accurate forecast, be
sure to include it.

8. Consider Dropshipping
Dropshipping is really the ideal scenario from an inventory management
perspective. Instead of having to carry inventory and ship products yourself—
whether internally or through third-party logistics—the manufacturer or
wholesaler takes care of it for you. Basically, you completely remove inventory
management from your business.

Many wholesalers and manufacturers advertise dropshipping as a service, but

even if your supplier doesn’t, it may still be an option. Don’t be afraid to ask.
Although products often cost more this way than they do in bulk orders, you
don't have to worry about expenses related to holding inventory, storage, and
fulfillment. You can test out dropshipping today, with Oberlo, for free.

It’s time to take control of your inventory management and stop losing money.
Choose the right inventory management techniques for your business, and
start implementing them today.