Working capital refers to the funds required by a business to meet short-term operational expenses. Gross working capital is the total capital invested in current assets, while net working capital is the excess of current assets over current liabilities. Current assets include cash, receivables, inventory, and prepaid expenses, while current liabilities include bills payable, creditors, loans, and outstanding expenses. Factors like the nature of business, production cycle, and growth influence working capital needs. Both too little and too much working capital can hurt business operations and profitability. Sources of working capital include retained earnings, reserves, depreciation funds, shares, debentures, loans, and public deposits.

1. WORKING CAPITAL MANAGEMENT –
vedapradha.r

2. Capital
Fixed Working

3. Gross working
capital
Net working capital

4. Working capital: It refers to the funds that are
required by a business firm to meet its short
term requirements in the form of operational
expenses.
Gross working capital: It is the capital invested on
the total current assets of a business concern.
Net working capital: It is the excess of current
assets over current liabilities or difference
between CA and CL.

5. Working
capital
components
Current Assets
Current
liabilities

6. Cash in hand
Cash at bank
Bills receivables
Debtors
Inventories
Short term loans and advances
Accrued income
Prepaid expenses

7. Bills payable
Creditors
Short term loans & advances
Bank overdraft
Outstanding expenses
Provision for taxation
Dividend payable

8. Purchase of raw materials
Payments of wages and
salaries
Operational daily
expenses
Provide credit obligations

9.  Nature of business
 Size of business
 Production cycle
 Manufacturing process
 Earning of firm
 Dividend policy
 Business cycle
 Credit policy
 Growth & expansion
 Availability of raw materials

11. Accumulation of raw
materials, spares
Locking of funds
Creates bad debts
Reduces collection period
Fall in profits

12. Buy materials in bulk
Tough in planning
Inefficient usage of fixed
assets
Rate of return on
investments falls
Overall operation of
business decreases

13. Internal
• Retained
earnings
• Reserves &
surplus
• Depreciation
funds
External
• Shares
• Debentures
• Loans from FI
• Financial
arrangements
• Public
deposits