Preview

Working Capital Managment

Powerful Essays
Open Document
Open Document
1779 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Working Capital Managment
Management Of Working Capital

Introduction
Working Capital-Definition Working Capital is the cash needed to pay for the day to day operation of the business. Along with long term investments , business also needs funds for short-term purposes to finance current operations. Investment in short term assets like cash, inventories, debtors etc., is called ‘Short-term Funds’ or ‘Working Capital’. Hence, the management of Working Capital is very important for the smooth running of business.
Calcution of Working Capital
Working Capital of a company is the difference between the Current Assets and the Current Liabilities of the company.

Working capital=Current Assets-Current Liabilities
Current Assets: Assets of the business held in the form of cash(e.g cash at the bank) or that can be quickly turned into cash. Current Assests

Stocks Cash Debtors Investments
Current Liabilities: Money owed by a business organization which is to be paid within next 12 months Current Liabilities

Trade Creditors Dividends Taxation Short term loans
Circulating capital – working capital is also known as circulating capital or current capital.’ “The use of the term circulating capital instead of working capital indicates that its flow is circular in nature.”

Structure of Working Capital
The different elements or components of current assets and current liabilities constitute the structure of working capital which can be illustrated in the shape of a chart as follows:

Working Capital Cycle makes it clear that the amount of cash is obtained mainly from issue of shares, borrowing and operations. Cash funds are used to purchase fixed assets, raw materials and used to pay to

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Working capital refers to the short term decisions relating to financing. If the working capital is neglected in any way, it can cause a company to go bankrupt. If this occurs, it means that employees will not get paid and suppliers will not get the proper funding for the supplies that were already ordered. Management of the working capital has to be strict. Policies will need to be put into place where everything is managed correctly. When there is a fault in the management of the policy, workers should come together and implement a plan that will allow for the decisions that were previously made to be taken into effect.…

    • 529 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Working capital is the measure of a company’s efficiency and operating liquidity. The working capital is usually calculated by subtracting current assets from current liabilities. To find the Working Capital Ratio, divide current assets by current liabilities. Working capital can be positive or negative depending on how much debt the company currently has on its balance sheet. Generally, companies that have a lot of working capital will experience more growth in the future. These companies will be able to excel because they can expand and improve their operations using their existing resources. Companies with small or negative working capital may lack the funds needed for growth or future operations. Working capital also shows if the company has sufficient liquid resources to satisfy short-term liabilities and operational expenses.…

    • 1395 Words
    • 6 Pages
    Good Essays
  • Better Essays

    Working capital is an important part of any business. By definition, working capital is the amount of money a company has to meet their liabilities. It is calculated by subtracting liabilities from assets. In order to keep a business running the amount of working capital should remain positive. However, this is not always the case. Many factors determine the amount of working capital for a business. One of these factors is the decisions made to either accept or decline certain opportunities that will affect sales, inventories, accounts receivable, and the bottom line. Sunflower Nutraceutacils is currently running neck and neck.…

    • 1241 Words
    • 5 Pages
    Better Essays
  • Good Essays

    The working capital indicates the liquidity of the company and how fast it can convert assets into cash in a company. In order to figure out how much working capital a company has, it is current assets over current liabilities. Microsoft’s current assets are $74,918 million dollars, and the current liabilities are $28,774 million dollars. In order to successfully manage working capital, the firm has to set the policies of managing the current assets, short term financing. There are four part of management of working capital these are; cash management, inventory management, debtor management, and short term financing. Cash management is to identify the cash balance which allows reducing cash holding cost but still able to meet day to day expenses. Inventory management is to understanding the level of inventory which allows…

    • 1201 Words
    • 5 Pages
    Good Essays
  • Good Essays

    Net working capital is current assets minus current liabilities. It is also an indicator for a company’s liquidity as it gives analytical prominence to a company’s financial position, particularly how much money it can generate in the next 12 months. Current assets include cash receipts from customers, cash and inventories whilst current liabilities include payments to suppliers, staff costs, taxes due and…

    • 522 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Working capital is defined as the day to day finances utilized by a firm. It is the firm’s current assets less its liabilities.…

    • 324 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Working capital management is basically the planning as well as being in control of how much and the mixes of those new assets from the business along with financing assets. To be more specific, it requires managers to make decisions about how much money, along with the liquid assets and the inventories that the business…

    • 697 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Hjbhjbhjb

    • 17672 Words
    • 71 Pages

    Working capital is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them.…

    • 17672 Words
    • 71 Pages
    Good Essays
  • Powerful Essays

    Working Capital of Icici

    • 18557 Words
    • 75 Pages

    Every Enterprise namely company/firm/individual requires money to meet the day to day business operations, for purchasing stocks and for acquiring raw materials for processing and conversion to finished good. Banks provide finance to purchase inventory directly by providing funded limits or by issuing letter of credit or Bank Guarantee. Bank also provides receivables finance to provide liquidity to the customers.…

    • 18557 Words
    • 75 Pages
    Powerful Essays
  • Satisfactory Essays

    Business 2

    • 348 Words
    • 2 Pages

    Money to fund the day to day workings of the business. Commonly called working capital: current assets (invitatories, receivables) less current liabilities (overdrafts, creditors). The main types- bank overdrafts, bank bill and trade credit…

    • 348 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    In simple words, working capital refers to that part of the firm’s capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.…

    • 1920 Words
    • 8 Pages
    Powerful Essays
  • Good Essays

    working capital

    • 1075 Words
    • 5 Pages

    Now a day working capital management has considered as the main central issues in the…

    • 1075 Words
    • 5 Pages
    Good Essays
  • Better Essays

    Concept of working capital includes meaning of working capital and its nature. Working capital is the investment in current assets. Without this investment, we can not operate our fixed assets properly. For getting good profits from fixed assets, we need to buy some current assets or pay some expenses or invest our money in current assets. For example, we keep some of cash which is the one of major part of working capital. At any time, our machines may need repair. Repair is revenue expense but without cash, we can not repair our machines and without machines, our production may delay. Like this, we need inventory or to invest in debtors and other short term securities.…

    • 3186 Words
    • 13 Pages
    Better Essays
  • Satisfactory Essays

    Wcm Financing by Bank

    • 433 Words
    • 2 Pages

    Working capital is that portion of a firm’s capital which is employed in short term operations. Current assets represent Gross Working Capital. The excess of current assets over current liabilities is Net Working Capital.…

    • 433 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Working Capital refers to the amount of day to day operating liquidity available to a business. This business belongs to the tertiary sector so there exist no raw materials which change in the course of production.…

    • 670 Words
    • 3 Pages
    Satisfactory Essays