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WORKING CAPITAL Prepared By  : -  PARAG VORA     MANISH  AGHASIYA    MILAN DAVE
CONTENTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
INTRODUCTION
WHAT IS WORKING CAPITAL? ,[object Object],[object Object]
CONCEPT OF  WORKING CAPITAL   ,[object Object],[object Object]
TYPES OF WORKING CAPITAL WORKING CAPITAL BASIS OF CONCEPT BASIS OF TIME Gross Working Capital Net Working Capital Permanent / Fixed WC Temporary / Variable WC Regular WC Reserve WC Special WC Seasonal WC
WORKING CAPITAL CYCLE ,[object Object],[object Object],[object Object]
WORKING CAPITAL CYCLE Work in progress Raw-material stock Finished goods stock Wages and overheads Trade creditors Taxation sale Trade debtors Shareholders cash Fixed   assets Loan   creditors Lease   payment Selling expenses
Thank You
REQUIREMENTS OF WORKING CAPITAL IN BUSINESS
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
OPERATING CYCLE Accounting  receivable finished Goods WIP RAW material cash
Nature & Importance of  WC Short term financial requirement Reduce the financing cost Helpful in expansion Success of a firm
Working capital management  (WCM)
Management of the WC
MEASUREMENT OF WORKINGCAPITAL REQUIREMENT
[object Object],[object Object],[object Object],THE MEASUREMENT OF WORKING CAPITAL EFFICIENCY IS AS UNDER
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
OBJECTIVES OF WORKING CAPITAL MANAGEMENT
THE WORKING CAPITAL OBJECTIVES ARE CONSIDERED AT MAIN FOUR LEVELS. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],ANALYSIS OF LIQUIDITY POSITION
[object Object],[object Object]
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],FOUR PHASES OF OPERATING CYCLE
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],(A) CURRENT RATIO
[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],(B) QUICK/ ACID TEST RATIO
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],LIQUIDITY CAN LIMIT:
[object Object],[object Object],[object Object],[object Object],[object Object],SEVERE LIQUIDITY OFTEN PROCEEDS
METHODS FOR ESTIMATING WORKING CAPITAL REQUIREMENT ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
BALANCE SHEET OF ZELLET STEEL COMPANY AS ON 31-3-2006 Liabilities Rs.(in lakhs) Assets Rs.(in lakhs) Share capital 200 Land & Building 60 Reserve & Surplus 160 Plant & Machinery 200 Term Loans 160 Inventories 200 Surplus creditors 120 Receivables 220 Provisions of tax  60 Cash & Bank 20 700 700
[object Object],[object Object],[object Object],[object Object],[object Object]
ESTIMATE OF W.C. REQUIREMENTS FOR THE YEAR 2006-07 PARTICULARS % OF SALES  BASED ON 2005-06 FIGURES ACTUAL (2005-06) ESTIMATSE (2005-06) Sales 100.00 1200 1800 Current  assets Inventories 16.67 200 300 Receivables 18.33 220 330 Cash & bank 1.67 20 30 TOTAL(A) 36.67 440 660 Current Liabilities Sundry creditors 10.00 120 180 Provision of tax 5.00 60 90 TOTAL(B) 15.00 180 270 Working capital (A-B) 21.67 260 390
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
TABLE 2.6 YEAR  SALES  CURRENT  ASSETS 2001  64 44 2002 88 54 2003 104 63 2004 114  87 2005 138 90
ESTIMATE WORKING CAPITAL  REQUIREMENTS FOR THE YEAR  2006 YEAR SALES(x)  CU.ASSETS(y) xy X2 2001 64 44  2816 4096 2002 88 54 4752 7744 2003 104 63 6552 10816 2004 114 87 9918 12996 2005 138  90 12420 19044 N = 5 X = 508  Y = 338 XY = 36458 X2 = 54696
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
Any Questions

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working capital

  • 1. WORKING CAPITAL Prepared By : - PARAG VORA MANISH AGHASIYA MILAN DAVE
  • 2.
  • 3.
  • 5.
  • 6.
  • 7. TYPES OF WORKING CAPITAL WORKING CAPITAL BASIS OF CONCEPT BASIS OF TIME Gross Working Capital Net Working Capital Permanent / Fixed WC Temporary / Variable WC Regular WC Reserve WC Special WC Seasonal WC
  • 8.
  • 9. WORKING CAPITAL CYCLE Work in progress Raw-material stock Finished goods stock Wages and overheads Trade creditors Taxation sale Trade debtors Shareholders cash Fixed assets Loan creditors Lease payment Selling expenses
  • 11. REQUIREMENTS OF WORKING CAPITAL IN BUSINESS
  • 12.
  • 13.
  • 14.
  • 15. OPERATING CYCLE Accounting receivable finished Goods WIP RAW material cash
  • 16. Nature & Importance of WC Short term financial requirement Reduce the financing cost Helpful in expansion Success of a firm
  • 20.
  • 21.
  • 22.
  • 23. OBJECTIVES OF WORKING CAPITAL MANAGEMENT
  • 24.
  • 25.
  • 26.
  • 27.
  • 28.
  • 29.
  • 30.
  • 31.
  • 32.
  • 33.
  • 34.
  • 35.
  • 36.
  • 37.
  • 38.
  • 39.
  • 40.
  • 41.
  • 42. BALANCE SHEET OF ZELLET STEEL COMPANY AS ON 31-3-2006 Liabilities Rs.(in lakhs) Assets Rs.(in lakhs) Share capital 200 Land & Building 60 Reserve & Surplus 160 Plant & Machinery 200 Term Loans 160 Inventories 200 Surplus creditors 120 Receivables 220 Provisions of tax 60 Cash & Bank 20 700 700
  • 43.
  • 44. ESTIMATE OF W.C. REQUIREMENTS FOR THE YEAR 2006-07 PARTICULARS % OF SALES BASED ON 2005-06 FIGURES ACTUAL (2005-06) ESTIMATSE (2005-06) Sales 100.00 1200 1800 Current assets Inventories 16.67 200 300 Receivables 18.33 220 330 Cash & bank 1.67 20 30 TOTAL(A) 36.67 440 660 Current Liabilities Sundry creditors 10.00 120 180 Provision of tax 5.00 60 90 TOTAL(B) 15.00 180 270 Working capital (A-B) 21.67 260 390
  • 45.
  • 46. TABLE 2.6 YEAR SALES CURRENT ASSETS 2001 64 44 2002 88 54 2003 104 63 2004 114 87 2005 138 90
  • 47. ESTIMATE WORKING CAPITAL REQUIREMENTS FOR THE YEAR 2006 YEAR SALES(x) CU.ASSETS(y) xy X2 2001 64 44 2816 4096 2002 88 54 4752 7744 2003 104 63 6552 10816 2004 114 87 9918 12996 2005 138 90 12420 19044 N = 5 X = 508 Y = 338 XY = 36458 X2 = 54696
  • 48.
  • 49.
  • 50.
  • 51.
  • 52.
  • 53.

Editor's Notes

  1. Helpful in expansion Success of a firm
  2. Working capital management (WCM)
  3. Management of the WC