Study on Working Capital Management

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SI. No.| CONTENTS| PAGE NO.|
| List of Tables| |
| List of Graphs | |
Chapter – 1| Introduction to the Study| |
Chapter – 2| Industry Profile and Company Profile| |
Chapter – 3| Data Analysis and Interpretation| |
Chapter – 4| Findings, Suggestions and Conclusion| |
| Bibliography| |
| Appendix| |

SI. No.| LIST OF TABLES| PAGE No.|
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SI. No.| LIST OF GRAPHS| PAGE No.|
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CHAPTER – 1
INTRODUCTION TO THE STUDY

CHAPTER – 1: INTRODUCTION TO THE STUDY
1.1.1 Working capital
Working capital is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. According to Shubin – “Working Capital is the amount of funds necessary to cover the cost of operating the enterprise” A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. Debtors Turnover Ratio

Debtor turnover ratio is the relationship between net sales and average debtors. It is also called account receivable turnover .The formula to ascertain Debtors Turnover Ratio:- = Net Credit Sales / Average Debtors (sundry debtors + bill receivables)

Liquidity Ratio
Liquidity ratio, expresses a company's ability to repay short-term creditors out of its total cash. The liquidity ratio is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered. The formula is the following:

LR = liquid assets / short-term liabilities.
Current Ratio
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows: Current Ratio = Current Assets/ Current Liabilities

1.1.2 Working capital management
Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable. * Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs. * Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment...
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