Working Capital
INTRODUCTION
WORKING CAPITAL MANAGEMENT
1. Introduction
2. Need of working capital
3. Gross working capital
4. Net working capital
5. Determinants of working capital
Working capital management
Working capital management is concerned with the problems arise in attempting to manage the current assets,the current liabilities and the inter relationship that exist between them. The term current assets refers to those assets which inordinary course of business can be,or,will be, turned into cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash,marketable securities,account receivable and inventory.Current liabilities ware those liabilities which intended at their inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses.
The goal of working capital management is to manage the firm’s current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.
Definition:-
According to Guttmann & Dougall-
“Excess of current assets over current liabilities”.
According to park & Gladson-
“The excess of current assets of a business [i.e. cash,accounts receivables,inventories]over current items,owned to employees and others[such as salaries & wages payable,account payable ,taxes owned to government]”.
Need of working capital management
There is a need for working capital in the form of current assets to deal with the problem arising out of lack of immediate realization of cash against goods sold. Therefore sufficient working capital is necessary to sustain sales activity. Technically this refers to
WORKING CAPITAL MANAGEMENT
1. Introduction
2. Need of working capital
3. Gross working capital
4. Net working capital
5. Determinants of working capital
Working capital management
Working capital management is concerned with the problems arise in attempting to manage the current assets,the current liabilities and the inter relationship that exist between them. The term current assets refers to those assets which inordinary course of business can be,or,will be, turned into cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash,marketable securities,account receivable and inventory.Current liabilities ware those liabilities which intended at their inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses.
The goal of working capital management is to manage the firm’s current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.
Definition:-
According to Guttmann & Dougall-
“Excess of current assets over current liabilities”.
According to park & Gladson-
“The excess of current assets of a business [i.e. cash,accounts receivables,inventories]over current items,owned to employees and others[such as salaries & wages payable,account payable ,taxes owned to government]”.
Need of working capital management
There is a need for working capital in the form of current assets to deal with the problem arising out of lack of immediate realization of cash against goods sold. Therefore sufficient working capital is necessary to sustain sales activity. Technically this refers to
Bibliography: ❖ Adams, R. (2008): Beyond Forecasting: Responsive Supply networks. Journal of Business Chemistry, 5 (3), ❖ Boer, G. (1999): Managing the Cash Gap. Journal of Accountancy, 188 (4), 32. ❖ Brealey, R., Myers, S. (2005): Principles of Corporate Finance, 7. Edition, McGraw-Hill/Irwin ❖ Budde, F., Felcht, U.-H., Frankemölle, H. (2006): Value creation – Strategies for the chemical industry, 2. Edition. Wiley-VCH. ❖ Christopher, M. (2008): Logistics and Supply Chain Management - Creating value-adding networks, 3. Edition. Financial Times / Prentice Hall, Great Britain. ❖ Ernst & Young (2008): Consumer products industry and working capital management.