Working Capital

* Working Capital - Def
  * amount of resources that a company requires to effectively cover the usual costs and expenses necessary to operate the business
  * Working Capital Required = (Increase in accounts receivable + Increase in inventory + Cash inflows i.e. cash in bank, bank loan, other current assets) – (Increase in accounts payable + Cash outflows i.e. prepaid expenses, payment to suppliers, other current liabilities)
  * Conversion Cycle – Mostly 90-120 days

  * Types of working capital
  * Fund – Based
  * CC (Cash Credit)
  * OD (Overdraft)
  * Pre-shipping/Post-Shipping credit
  * Non-Fund Based
  * Letter of Credit
  * Bank Guarantee
  * Stages in the process
  * Sourcing
  * Acceptance of the limit by the client(GO/NOGO)
  * Credit Appraisal
  * Risk approval and sanction
  * Documentation/Disbursement
  * Sourcing
  * Inputs from the customer
  * Projected financial
  * Need
  * Profitability of the company in last 3 years
  * Business Profile
  * Industry functioning

  * Acceptance of the limit
  * Checks the feasibility of the case
  * Thorough analysis has to be done
  *   GO/NOGO
  * Important Ratio
  * Current Ratio
  * EBITDA/TOI
  * Total debt/TNW
  * LTD/TNW
  * Assessment and Ratios
  * 25% of the turnover
  * 20% by Bank
  * 5%   Net worth
  * 3* TNW
  * TNW=Share Capital+Reserves & Surpluses-Fictitious asset
  * Production/Processing Cycle
  * Debtors + Inventory-Creditors
  * DER(Deb Equity Ratio)
  * TOL/TNW
  * Net Working Capital
  * Current Asset-Current Liability
  * Sales
  * PAT
  * PAT/Sale
  * Profitability for each Rs. 100 of sales

  * Credit appraisal
  * Dedupe Check
  * MCA
  * CIBIL
  * BIFR
  * Banking
  * Inward return
  * Outward Return
  * Overdrawing
  * DD Return
  * Credit summation
  * We deduct all the outward return from the total Credit summation
  * Credit Routing
  * Take statement... [continues]

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