Professional Documents
Culture Documents
Presentation by
VICTORY group
1.Kanaiya Gadhvi 11
2.Darshan Joshi 20
3.Bharat Ahir 03
4.Mayur Jadeja 17
5.Jaimin Patel 40
6.Hardeep Jadeja 16
Introduction
Study of working capital is not only
an important part of financial management
but also are overall management of the
business concern.
Working capital is described as the
capital which is not fixed but the more
common uses of the working capital is to
consider it as the difference between the
book value of current assets and current
liabilities.
Classification of capital
Capital
b) Wages
c) Overheads
Total Current liabilities
3. Net Working Capital 1-2
Add margin for contingency
4 Net Working Capital Required
Concept of Working Capital
Net
Working
Capital
Working Capital Concepts
Gross Working Capital
GWC = CA
PERMANENT TEMPORARY
WORKING CAPITAL SEMI VARIABLE
WORKING CAPITAL WORKING CAPITAL
Time
Temporary Working Capital
seasonal requirements.
TIME
Semi Variable Working
Capital
Working Capital
Amount of
Time
Needs of Working Capital
1.Purchase of raw material & spares
2.
3.Payment of wages & salary
4.
5.Day to day expenses
6.
7.Provide credit obligations
Fa cto rs D e te rm in in g W C
Fa cto rs:
1 . Nature of Business
Manufacturing and trading enterprises
require fairly large amount of working
capital , while
Service enterprises and hotels and
restaurants need to carry less Working
capital
2. Production Cycle
The longer the production cycle, the
larger the WC need.
Fa cto rs D e te rm in in g W C
3 . Business cycle
During boom conditions the need for WC requirement is
larger
During recessionary conditions the need for WC is low
due to low volume of sales and production
4.
5 . Credit Policy
Liberal credit policy to customers increase the
need for WC
5.
6 . Growth and Expansion
Growth industries and firms require more WC
6.
7 . Availability of raw materials
A firm require adequate level of inventory of raw
materials, which increase the need for WC
Fa cto rs D e te rm in in g W C
7. Production Policy :
If the company maintains the continues production
policy, there is a need of regular WC
8. Earning Capacity :
high level of earning capacity, they can generate
more WC
T h e O p e ra tin g C ycle
The Operating Cycle (OC) is the time between ordering
materials and collecting cash from receivables.
R
D W
Raw material ( R)
Work in Process ( W)
Finished goods (F) O= R+W+F+D-C
Debtor collection stage (D)
Creditors payment stage (C)
. .
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