Purpose of Return Point
Return point is calculated
for the purposes determining how much fund is required to be injected or withdrawal
from the business. It is not feasible for business to operate at a very high
level and low level of allowed limit. Because business can easily cross those
limit any time and therefore return point concept comes into play that brings
the cash level to return point.
1. Lower limit
Cash touches lower limit difference between
lower limit and return amount is required to be injected in the business to
restore return point.
2. Upper limit
Cash touches upper limit
funds may be withdrawn to restore return point.
