A Comprehensive Study on Banks
Literature Review
WORKING CAPITAL MANAGEMENT
Every business needs funds for two purposes for its establishment and to carry out its day-to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land, building, etc. Investments in these assets represent that part of firm's capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purpose for the purchase of raw material, payment of wages and other day-to-day expenses etc.
These funds are known as working capital. In simple terms, working capital refers to that part of the firm's capital which is required for financing short-term of current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assets keep revolving fast and are being constantly converted into cash and this cash flow out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.
1) Jeng-Ren, C. & Cheng, L. (2006) in their article, “Determinants of working capital” investigate the determinants of working capital management. This study investigates the relation of business indicator and management of short-term capital from the perspective of a firm's working capital management, which traditionally is rated by current ratio, quick ratio, and net working capital.The authors have used net liquid balance and working capital requirements as measures of a company's working capital management. Results indicate that the debt ratio and operating cash flow affect the company's working capital management, and how it influences the business cycle, industry effect, growth of the company, performance of the company and firm size. From the data it can be seen that companies could maintain relatively loose capital management during the prosperous period (1999-2000), when capital was readily
WORKING CAPITAL MANAGEMENT
Every business needs funds for two purposes for its establishment and to carry out its day-to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land, building, etc. Investments in these assets represent that part of firm's capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purpose for the purchase of raw material, payment of wages and other day-to-day expenses etc.
These funds are known as working capital. In simple terms, working capital refers to that part of the firm's capital which is required for financing short-term of current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assets keep revolving fast and are being constantly converted into cash and this cash flow out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.
1) Jeng-Ren, C. & Cheng, L. (2006) in their article, “Determinants of working capital” investigate the determinants of working capital management. This study investigates the relation of business indicator and management of short-term capital from the perspective of a firm's working capital management, which traditionally is rated by current ratio, quick ratio, and net working capital.The authors have used net liquid balance and working capital requirements as measures of a company's working capital management. Results indicate that the debt ratio and operating cash flow affect the company's working capital management, and how it influences the business cycle, industry effect, growth of the company, performance of the company and firm size. From the data it can be seen that companies could maintain relatively loose capital management during the prosperous period (1999-2000), when capital was readily