Working Capital Management

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WORKING CAPITAL MANAGEMENT
By

D.BINISHA
Reg No: 312211631024

REPORT ON
SUMMER INTERNSHIP
AT
INTERNATIONAL INSTITUTE OF PROJECT MANAGEMENT

SSN SCHOOL OF MANAGEMENT & COMPUTER APPLICATIONS
KALAVAKKAM- 603 110

ACKNOWLEDGEMENT

I extend my sincere thanks to our Director, Prof. B. Srinivasan for inculcating in us, a passion for excellence in all our activities including this project.

I am grateful to my external guide Mr. O. ARIVAZHAGAN, CEO, International Institute of Project Management (IIPM) for providing me the much needed practical insights and guidance in carrying out this project. I would also like to acknowledge with thanks, the support received from the other office staff, had the patience to teach and give an exposure into the corporate world. I would also acknowledge Mr. Sampath Kumar who taught the basic concepts clearly.

I would extend my hearty gratitude towards my family and friends who gave me full support for completing the project.

TABLE OF CONTENTS

S.NoCONTENTSPAGE NUMBER
1Executive Summary4
2Company Background5
3Introduction6
4Classification of Working Capital7
5Factors determining Working Capital8
6Working Capital Calculation11
7Working capital template13
8Emerging Concepts15
9My learning17
10Conclusion18
11References19

Executive summary:

In a perfect world, there would be no necessity for current assets and liabilities because there would be no uncertainty, no transaction costs, information search costs, scheduling costs, or production and technology constraints. The unit cost of production would not vary with the quantity produced. Borrowing and lending rates shall be same. Capital, labor, and product market shall be perfectly competitive and would reflect all available information, thus in such an environment, there would be no advantage for investing in short term assets. However the world we live is not perfect. It is characterized by considerable amount of uncertainty regarding the demand, market price, quality and availability of own products and those of suppliers. There are transaction costs for purchasing or selling goods or securities. Information is costly to obtain and is not equally distributed. There are spreads between the borrowings and lending rates for investments and financing of equal risks. Similarly each organization is faced with its own limits on the production capacity and technologies it can employ there are fixed as well as variable costs associated with production goods. In other words, the markets in which real firm operated are not perfectly competitive. These real world circumstances introduce problem’s which require the necessity of maintaining working capital. In corporate financial management, the term Working capital management” (net) represents the excess of current assets over current liabilities. WORKING CAPITAL In simple words working capital is the excess of current Assets over Current liabilities. 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. Working capital management entails short term decisions - generally, relating to the next one year period - which is "reversible". Decisions relating to working capital and short term financing are referred to as working capital management. This involves managing the relationship between a firm's short-term assets and its short-term liabilities. There are many advantages to a business that actively manages its cash flow. There are a number of different ways to calculate working capital, because each firm may have a slightly different way of doing business. The formula used in this report is more accurate. This report explains about the effective management of Working Capital and its advantages to the...
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