The document discusses working capital management. It defines working capital as money available for a company's day-to-day operations, and that it measures liquidity, efficiency, and overall health. Working capital provides resources to finance daily operations, and profitability depends on how it is managed. The document outlines key aspects of working capital like short lifespan, liquidity, and interrelation of assets. It also discusses determining factors, importance of adequate working capital, and disadvantages of redundant or inadequate working capital levels.

1. Presented By : NEERAJ GARWAL
WORKING CAPITAL
MANAGEMENT

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WORKING CAPITAL
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 Working capital is money available to a company for day-to-day
operations
 Working capital measures a company's liquidity, efficiency, and
overall health .
 In the words of E W Walker,
“Working capital provides the net resources with which a company
can finance day-to-day operations. A firm’s profitability is
determined by the way its working capital is managed.”

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FEATURES OF
WORKING
CAPITAL
1. Short Life Span
2. Swift Transformation
3. Short-term Focus
4. Repetitive and frequent
5. Liquidity
6. Inter-relation among
Assets
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WORKING CAPITAL MANAGEMENT
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Weston and brigham opine that,
“Working capital management refers to all aspects of the administration of
both current assets and current liabilities.”
James C. Van Horne is of the view that,
 “Current assets, by definition, are assets normally converted into cash
within one year. Working Capital Management is concerned with the
administration of these assets - namely cash and marketable securities,
receivables and inventories.”

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Concepts of working capital
Gross Working Capital
Investment in current assets .
Converted into cash within one financial year.
 Includes Following :
 Cash
 Short – Term securities
 Debtors
 Bills Receivables
 Stock (Inventory)
Net Working Capital
Difference between Current assets
and current liabilities .
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• PERMANENT OR FIXED
WORKING CAPITAL
a. Regular working capital
b. Reverse working capital
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TIME BASED WORKING CAPITAL
• TEMPORARY OR VARIABLE
WORKING CAPITAL
a. Seasonal working capital
b. Special working capital
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DETERMINANTS OF WORKING CAPITAL
INTERNAL FACTORS :
a. Nature and size of business .
b. Firm’s production policy .
c. Firm’s credit policy .
d. Growth and expansion of business .
e. Profit margin and dividend policy .
f. Operating efficiency of the firm .
g. Co-ordinating activities in firm .
EXTERNAL FACTORS :
a. Business fluctuation
b. Changes in technology
c. Import policy
d. Taxation policy

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NEED FOR WORKING CAPITAL MANAGEMENT
• INVENTORY
MANAGEMENT • CASH
MANAGEMENT
• RECEIVABLES
MANAGEMENT
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IMPORTANCE OR ADVANTAGES OF ADEQUATE
WORKING CAPITAL
1. Solvency of business .
2. Goodwill .
3. Easy loans .
4. Cash discounts .
5. Regular supply OF RAW MATERIAL .
6. Regular payment .
7. Exploitation of favourable market conditions .
8. Ability to face crisis .
9. Quick and regular return on investments .
10.High morale .

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DISADVANTAGES OF REDUNDANT OR EXCESSIVE
WORKING CAPITAL
1. Opportunity cost .
2. Unnecessary purchasing and accumulation of inventories.
3. Bad debts.
4. Overall inefficiency
5. Value of shares may also fall.
6. Speculative transactions.

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Disadvantages of inadequate working capital
1. Not able to meet short-term liabilities .
2. impossible to utilize efficiently the fixed assets .
3. ROI falls .
4. It becomes difficult for the firm to exploit favorable market
conditions and undertake profitable projects due to lack of working
capital.
5. It cannot buy its requirements in bulk and cannot avail of discounts,
etc.
6. It becomes difficult for the firm to exploit favorable market
conditions and undertake profitable projects due to lack of working
capital.

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BIBLIOGRAPHY
1. https://shodhganga.inflibnet.ac.in/bitstream/10603/91572/10/10.%
20chapter%202.pdf
2. https://en.wikipedia.org › wiki › Working_capital
3. Financial Management By : I M Pandey .
4. https://www.scribd.com › doc › Working-Capital-Management
5. https://www.investopedia.com › terms › workingcapital

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