The document discusses the concept of working capital in the modern business era. It defines working capital as the time it takes to convert current assets minus current liabilities into cash. The working capital cycle can be calculated by adding inventory and receivable days and subtracting payable days. A sample calculation shows a company with an inventory of 85 days, receivables of 20 days and payables of 90 days, resulting in a working capital cycle of 15 days. Growing companies often require financing to cover expenses until payment is received from customers. Banks frequently provide financing against inventory or accounts receivable to help deal with working capital needs.

1. CONCEPT OF WORKING
CAPITAL IN MODERN ERA
SHUBHAM BHATT
DEPARTMENT OF COMMERCE
AND MANAGEMENT
BKNMU
PROF.ANITABA GOHIL
DEPARTMENT OF COMMERCE
AND MANAGEMENT
BKNMU
SUBMITTED BY SUBMITTED TO

2. MEANING OF WORKING CAPITAL
The Working Capital Cycle for a business is the length of time it
takes to convert the total net working capital (current assets less
current liabilities) into cash. Businesses typically try to manage this
cycle by selling inventory quickly, collecting revenue from customers
quickly, and paying bills slowly to optimize cash flow.

4. EXAMPLE OF TIME MANAGEMENT
Working Capital Cycle Sample Calculation
Now that we know the steps in the cycle and the formula, let’s
calculate an example based on the above information.
Inventory days = 85
Receivable days = 20
Payable days = 90
Working Capital Cycle = 85 + 20 – 90 = 15
This means the company is only out of pocket cash for 15 days
before receiving full payment.

5. Businesses with normal/positive cycles often require
financing to cover the period of time before they
receive payment from customers and clients. This is
especially true for rapidly growing companies. A
common warning axiom regarding growth and working
capital is to be careful not to “grow the company out of
money.”
To deal with this potential problem, companies often
arrange to have financing provided by a bank or other
financial institution. Banks will often lend money
against inventory and will also finance accounts
receivable.

6. THANK YOU