Working capital refers to a company's current assets and current liabilities. It represents the funds available for day-to-day operations, including purchasing raw materials and paying wages. Positive working capital ensures a firm can continue operations and meet short-term debts and expenses as they become due. The management of working capital involves managing inventory, receivables, payables, and cash. It is important for operational efficiency, securing credit, cash flow management, and maintaining liquidity and solvency. Both too much and too little working capital can negatively impact a business.

1. Submitted By
 Subhankar Das
 Roll No-3720
METROPOLITAN SCHOOL OF MANAGEMENT

2. capital is the keynote of economic development. In
this modern age, the level of economic development is
determined by the proportion of capital available.
Capital (economics), A factor of production that
is not wanted for itself but for its ability to help in
producing other goods.

3.  Working capital refers to the funds invested in Current
assets , sundry debtors, inventories , cash and bank balance
 It is the fund required to support day to day operations
such as purchase of raw materials , payments of wages and
defraying other expenses for operations
 Working capital = Current assets – Current liabilities
 It measures how much in liquid assets a company has
available to build its business.

4.  Positive working capital is required to ensure that a firm is
able to continue its operations and that it has sufficient
funds to satisfy both maturing short-term debt and
upcoming operational expenses.
 The management of working capital involves managing
inventories, accounts receivable and payable and cash.
 An increase in working capital indicates that the business
has either increased current assets (that is received cash, or
other current assets) or has decreased current liabilities,

5. Nature of Business
Size of business
Production policy
Operating efficiency
Credit policy
Dividend policy
Growth and expansion
Abnormal factor –strikes, lockout, inflation Etc

7.  Conversion of cash into raw materials.
 Conversion of raw materials into work in
progress.
 Conversion of work in progress into finished
stock.
 Conversion of finished stock into accounts
receivables(Debtors)through sale
 Conversion of account receivables into cash.

8. KINDS 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

9. Difference between permanent & temporary
working capital
Amount Variable Working Capital
of
Working
Capital
Permanent Working Capital
Time
Permanent and temporary working capital for Stable firm

10. Variable Working Capital
Amount
of
Working
Capital
Permanent Working Capital
Time
Permanent and temporary working capital for Growing firm

11. IMPORTANCE OF WORKING CAPITAL
• Goodwill
• Easy loans
• Cash discounts
• Regular Supply of Raw Material:
• Regular payment of salaries, wages and other
day to day commitments
• Ability to Face Crises:
• Quick and regular return on investments

12. Reducing the
capital
employed
Debtors
Management
(recievables)
to increase
cash flow
Short term
financing-
loans
utilization,
cash
conversion
cycle
Creditors
management
(payables)
Cash
management

13. ADVANTAGES
Goodwill Creditability
Creates
environment
of security,
confidence
Maintains
solvency and
liquidity
Unnecessary
accumulation
of inventory
Indicates
defective credit
policy
Inefficiency
Excessive W.C
meant idle
funds which
may decrease
return on
investment
DISADVANTAGES

14. Negative Working Capital
McDonald's had a negative working capital
of $698.5 million between 1999 and 2000
Amazon.com
Wal-Mart