Working capital management

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All About Working Capital and its Types

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Working capital management

  1. 1. February 27, 2012 By: Sonali Srivastava Working Capital Management
  2. 2. What is Working Capital Management <ul><li>The Working Capital Management refers to management of the Working Capital ( Fund to meet day to day expenses). </li></ul><ul><li>Gross WC Concept :- Current Assets </li></ul><ul><li>Net WC Concept :- Current Asset- Current Liability. </li></ul>February 27, 2012 By: Sonali Srivastava
  3. 3. Operating Cycle <ul><li>Working Capital is required because of the time gap between the Sales and there Actual realisation in cash. This time gap is technically termed as ‘Operating Cycle’ of a business. </li></ul>February 27, 2012 By: Sonali Srivastava
  4. 4. Operating Cycle Graph <ul><li>Cash Purchase </li></ul><ul><li>Credit Purchase </li></ul>February 27, 2012 By: Sonali Srivastava
  5. 5. Types Of Working Capital <ul><li>On The Basis Of Time: </li></ul><ul><li>Permanent Working Capital/Fixed Working Capital </li></ul><ul><li>Temporary Working Capital/ Variable Working Capital/ Fluctuating Working Capital </li></ul>February 27, 2012 By: Sonali Srivastava
  6. 6. 1. Permanent/ Fixed Working Capital <ul><li>This Refers to that minimum amount of investment in all Current Asset which is required at all time to carryout minimum level of business activity. In other words it represents the required on a continuing basis over the entire year. Tendon committee has referred to this type of Working Capital as core Current Asset. Ex: Cash, Stock, Fixed Deposite, etc. </li></ul>February 27, 2012 By: Sonali Srivastava
  7. 7. 2. Temporary/ Variable/ Fluctuating Working Capital <ul><li>The amount of such Working Capital keeps on fluctuating from time to time on the basis of business activity. In other words it represent additional Current Asset required at different time during the operating year. Ex: Extra Inventory, etc. </li></ul>February 27, 2012 By: Sonali Srivastava
  8. 8. Graphs <ul><li>Short Term </li></ul><ul><li>Long Term </li></ul>February 27, 2012 By: Sonali Srivastava
  9. 9. In a manufacturing it is generally excepted that higher level of Working Capital Decrease the Risk & Decrease the Profitability too but lower level of Working Capital Increase the Risk but have the potential of Increasing the Profitability also. February 27, 2012 By: Sonali Srivastava
  10. 10. February 27, 2012 By: Sonali Srivastava Thank You

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