WORKING CAPITAL MANAGEMENT

PRESENTED BY Priyanka garale-15 Ankita patil- 07 Salma qureshi- 23 Mitali goregoankar- 22 Sachin nagargoje-42

TWO TYPES OF CAPITAL 1. Fixed capital: Fixed assets are to be used in business for longer period and capital invested in such acquisitions are called as fixed capital. 2. Working capital: Capital essential for short term purposes & capital invested for such purposes are called as working capital.

WHAT IS WORKING CAPITAL

Working capital typically means the firms holding of current or short-term assets such as cash, inventory and marketable securities.

The capital of a business that is used in day to day operations

 Funds invested in current assets keep revolving fast and are constantly converted into cash.
This cash flow out again in exchange for other current assets. Working Capital is also known as revolving or circulating capital or short-term capital.

How working capital is calculated???

Working capital estimates trading concern

Particulars CURRENT ASSESTS i) Stock of raw materials ii) Work in progress a) raw materials b) direct labor c) overheads iii) Stock of finished goods a) raw materials b) direct labor c) over heads iv) Sundry debtors v) Payments in advance vi) Balance of cash of daily expenses vii) Any other item LESS: CURRENT LIABILITIES i) Creditors

Amount (rs)

XXX XXX XXX XX XX XX XX XXX XXX XXX XXX XX XX XX

ii) Lag in payment of expenses iii) Any other item

Sum by ankita
Anki include ur sum here.ok dear other wise delete the slide

Importance of adequate working capital

It enables the company to meet its obligations. Ensures the solvency of the company. Enables the organization to tide over difficult periods successfully Enhances the good will of the company.

Effects of inadequate working capital

Fixed Assets cannot efficiently and effectively be utilized on account of lack of sufficient working capital. Low liquidity position may lead to liquidation of firm. Credit worthiness of the firm may be damaged.

It may not be able to take advantages of cash discount.

Factors determining working capital requirement

Nature of business

Production policies
Size of the business unit Terms of purchases & sales Turnover of inventories Turnover of circulating capital Business cycle

Working capital cycle

Cash flows in a cycle into, around and out of a business

 There are two elements in the business cycle that absorb cash - Inventory (stocks and workin-progress) and Receivables (debtors owing you money). The main sources of cash are Payables (your creditors) and Equity and Loans. Each component of working capital (namely inventory, receivables and payables) has two dimensions ........TIME ......... and MONEY

Working capital management

Working capital management is concerned with the problems that arise while managing current assets, current liabilities, and inter-relationship that exists between them. 1. Current assets: In ordinary course of business, can be converted into cash within one year without undergoing any diminution in value. E.g., cash, marketable securities, accounts receivable, and inventory 2. Fixed assets: Permanent in nature and are held for use in business activities. E.g., land, building, machinery etc.

3. Current liabilities: Obligations that have to be paid in a single accounting period. E.g., accounts payable, bills receivable, bank overdraft and outstanding expenses
4. Long-term liabilities: Obligations that can be repaid over a period greater than a single accounting period. E.g., share capital, debentures, long-term loans etc.

 Every firm requires funds for two purposes: 1. Long term funds are required to create production facilities through purchase of fixed assets

1. Short term funds are required for the purchase of raw materials, payment of wages, and other day-to-day expenses.

Sources of additional working capital

Existing cash reserves

Profits (when you secure it as cash!)

Payables (credit from suppliers)

New equity or loans from shareholders

Bank overdrafts or lines of credit Long-term loans

Working capital management in real estate

 Businesses use capital for construction, renovation, furniture, software, equipment, or machinery.

It is also commonly used to purchase inventory, or to make payroll. Capital is also used often by businesses to put a down payment down on a piece of commercial real estate.
Working capital is essential for any business to succeed.

THANK YOU