Working Capital Working capital is a firms investment in short-term assets--cash, marketable securities, inventory, and accounts receivable.

Net working capital is current assets minus current liabilities. Working capital policy refers to the basic policy decisions regarding (1) target levels for each category of current assets and (2) how current assets will be financed. A measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as:

Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). Gross and Net Working Capital Working capital refers to difference between current asset and current liabilities, working capital can be further subdivided as gross working capital and net working capital. Lets look at both of them Gross Working Capital Gross working capital refers to the amount which the company has invested into the current assets; current asset includes cash, stock, debtors or anything which can be converted into cash within a year.

Net Working Capital Net working capital refers to the difference between the current assets and current liabilities of the company, current asset as explained above will be same and current liabilities include trade creditors, bills payable, outstanding expenses or any debt which company has to pay within a year. As one can see from the above that both gross working capital and net working capital are different because under gross working capital one calculate the amount which the company has invested into current assets, which implies that current liabilities are excluded while calculating gross working capital, which is not the case under net working capital where one calculate the difference between current assets and current liabilities.

A relaxed current asset investment policy refers to a policy under which relatively large amounts of cash, marketable securities, and inventories are carried and under which sales are stimulated by a liberal credit policy, resulting in a high level of receivables. A restricted current asset investment policy refers to a policy under which holdings of cash, securities, inventories, and receivables are minimized; while a moderate current asset investment policy lies between the relaxed and restricted policies. A moderate current asset financing policy matches asset and liability maturities. It is also referred to as the maturity matching, or self-liquidating approach. Lock Box A service offered by banks to companies in which the company receives payments by mail to a post office box and the bank picks up the payments several times a day, deposits them into the company's account, and notifies the company of the deposit. This enables the company to put the money to work as soon as it's received, but the amounts must be large in order for the value obtained to exceed the cost of the service. Lockbox services are sometimes called 'Remittance Services' or 'Remittance Processing' A partnership is an agreement between two or more people to finance and operate a business. Partnership Partnerships, unlike sole proprietorships, are entities legally separate from the partners themselves. In a general partnership, however, profits and losses flow through to the partners tax returns. Each general partner has equal responsibility and authority to run the business. Each partner should be involved in day-to-day operations of the business, and should make management decisions. Any partner may represent the business without the knowledge of the other partnersthe actions of one partner can bind the entire partnership. If one partner signs a

contract on behalf of the partnership, the general partnership and each partner are responsible for that contract. The shared ownership concept that characterizes a business partnership gives it certain distinct advantages and disadvantages. Business Partnership Advantages Partnerships are relatively easy to establish. With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater. Prospective employees may be attracted to the business if given the incentive to become a partner. A partnership may benefit from the combination of complimentary skills of two or more people. There is a wider pool of knowledge, skills and contacts. Partnerships can be cost-effective as each partner specializes in certain aspects of their business. Partnerships provide moral support and will allow for more creative brainstorming. Business Partnership Disadvantages Business partners are jointly and individually liable for the actions of the other partners. Profits must be shared with others. You have to decide on how you value each others time and skills. What happens if one partner can put in less time due to personal circumstances? Since decisions are shared, disagreements can occur. A partnership is for the long term, and expectations and situations can change, which can lead to dramatic and traumatic split ups. The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

 A partnership usually has limitations that keep it from becoming a large business. You have to consult your partner and negotiate more as you cannot make decisions by yourself. You therefore need to be more flexible. A major disadvantage of a partnership is unlimited liability.

. A major disadvantage of doing business as a general partnership is that all

partners are personally liable for business debts and liabilities

What is the difference between a general partnership and a limited partnership? There are two types of partnerships: general partnerships and limited partnerships (LPs). In a general partnership, each partner can incur obligations on behalf of the partnership, and each assumes unlimited liability for the partnership's debts. For example, if the partnership owns a truck, and the truck strikes and injures a pedestrian, each partner is personally liable for any damages or judgments. This unlimited liability risk makes limited partnerships an attractive alternative to general partnerships. In an LP, there is usually just one general partner (although there can be more). The other partners are called limited partners. The general partner has full management responsibility runs the day-to-day operations of the business. A limited partner cannot incur obligations on behalf of the partnership and does not participate in the firm's daily operations or management. In fact, a limited partner's role usually involves nothing more than making an initial capital investment in exchange for a share of the firm's profits. While the general partner wields most of the power, they also bear the lions share of the liability. A limited partners liability, on the other hand, cannot exceed their financial contribution to the partnership. So, if a truck owned by a limited partnership accidentally injures someone, the damaged party could

go after the general partners personal assets but could only go after a limited partners actual investment in the partnership. As a result, a limited partnership offers two key advantages: It gives the general partner the freedom to run the business without interference, and it protects the limited partners if something goes wrong. Limited partners may choose to get more involved in a partnership's daily operations, but they do so at their own risk. In the eyes of the law, their involvement may make them a general partner and strip them of their limited liability. Instruments of Money Mrkt. The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, Repos.