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Working Capital: Soumendra Roy Nims

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WORKING CAPITAL SOUMENDRA ROY NIMS

Working Capital Current Assets minus Current Liabilities

Working Capital How much is enough?

Depends…

Working Capital Concepts Net Working Capital Current Assets - Current Liabilities.

Gross Working Capital The firm’s investment in current assets.

Working Capital Management The administration of the firm’s current assets and the financing needed to support current assets.

ARGUMENTS IN FAVOUR OF GROSS WORKING CAPITAL •







Current assets is a symbol of working capital Any acquisition of funds increases the working capital Managers plan their business operations according to the current assets concept

Utility of current assets remain the same whether financed for long-term loans or short-term loans

MANAGEMENT

OF

WORKING

CAPITAL

(

WCM

)

Management of working capital is concerned with the  problems that arise in attempting to manage the current assets, the current liabilities and the inter-relationship that exists between them. In other words, it refers to all aspects of administration of CA and CL. Working Capital Management Policies of a firm have a great effect on its  profitability, liquidity and structural health of the organization.

Matching approach to asset financing Total Assets

Rs

Short-term Debt Fluctuating Current Assets

Permanent Current Assets

Fixed Assets

Time

Long-term Debt + Equity Capital

Conservative approach to asset financing Total Assets

Rs

Fluctuating Current Assets

Permanent Current Assets

Fixed Assets

Time

Short-term Debt

Long-term Debt + Equity capital

COMPUTATATION OF WORKING CAPITAL

This concludes the presentation, thank you for your time and interest. Any questions?

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