Working Capital Mgt
Working Capital
Management
Submitted to: Submitted by:
Mr. Mukesh Hans Swati Chaudhry MBA-IIsem
Working Capital Management
The working capital management is a delicate area in the field of financial management. Every business needs investment to procure fixed assets, which remain in use for a longer period. Money invested in these assets is called ‘Long term Funds’ or ‘Fixed Capital’. Business also needs funds for short-term purposes to finance current operations. Investment in short term assets like cash, inventories, debtors etc., is called ‘Short-term Funds’ or ‘Working Capital’.
The ‘Working Capital’ can be categorized, as funds needed for carrying out day-to-day operations of the business smoothly. The management of the working capital is equally important as the management of long-term financial investment.
Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required is bound to collapse without:
(i) adequate supply of raw materials for processing;
(ii) cash to pay for wages, power and other costs;
(iii) creating a stock of finished goods to feed the market demand regularly.
(iv) the ability to grant credit to its customers.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1. Gross working capital
2. Net working capital
In broad sense, the term working capital refers to the gross working capital and represents the amount of funds invested in current assets. Current assets are those which in the ordinary course of business can be converted into cash within a short period of normally one accounting year.
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6.
Management
Submitted to: Submitted by:
Mr. Mukesh Hans Swati Chaudhry MBA-IIsem
Working Capital Management
The working capital management is a delicate area in the field of financial management. Every business needs investment to procure fixed assets, which remain in use for a longer period. Money invested in these assets is called ‘Long term Funds’ or ‘Fixed Capital’. Business also needs funds for short-term purposes to finance current operations. Investment in short term assets like cash, inventories, debtors etc., is called ‘Short-term Funds’ or ‘Working Capital’.
The ‘Working Capital’ can be categorized, as funds needed for carrying out day-to-day operations of the business smoothly. The management of the working capital is equally important as the management of long-term financial investment.
Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required is bound to collapse without:
(i) adequate supply of raw materials for processing;
(ii) cash to pay for wages, power and other costs;
(iii) creating a stock of finished goods to feed the market demand regularly.
(iv) the ability to grant credit to its customers.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1. Gross working capital
2. Net working capital
In broad sense, the term working capital refers to the gross working capital and represents the amount of funds invested in current assets. Current assets are those which in the ordinary course of business can be converted into cash within a short period of normally one accounting year.
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6.