Presentation on Working Capital Management for

Transcript:Presentation on Working Capital Management for:
Presentation on Working Capital Management for BBA(H) 3rd SEM Core Paper-5 Unit: III By Mr.Gunamoy Hazra Dept.of Business Administration CHAPTER OBJECTIVES After studying this Chapter you should understand and be able to Define working capital Working capital concepts Types of Working Capital, Importance of Working Capital Significance of WC Management Factors determining WC Requirement Different components of WC Working capital cycle Working capital requirement forecast Working Capital Management Working Capital Concept Working capital is amount of funds necessary to cover the cost of operating the enterprise. Working Capital refers to that part of the firm’s capital, which is required for financing short-term or current assets like Cash,short term marketable securities, debtors and inventories etc. Funds invested in current assets keep revolving fast and are constantly converted into cash and 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. Classification of Working capital On the Basis of Concept: Gross working capital is the capital invested in total current assets of the enterprise. Examples of current assets are : cash in hand and bank balances, Bills Receivable, Short term loans and advances, prepaid expenses, Accrued Incomes etc. Net Working Capital = Current Assets – Current Liabilities When current assets exceed the current liabilities the working capital is positive and negative working capital results when current liabilities are more than current assets. Examples of current liabilities are Bills Payable, Sunday debtors, accrued expenses, Bank Overdraft, Provision for taxation etc. Net working capital is an accounting concept of working capital. Contd. On the Basis of Time Permanent or Fixed working capital It is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. regular working capital is the capital required to ensure circulation of current assets from cash to inventories, from inventories to receivables and from receivables to cash and so on. Reserve working capital is the excess mount over the requirement for regular working capital which may be provided for contingencies that may arise at unstated periods such as strikes, rise in prices, depression etc. Contd. Temporary or Variable working capital It is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital is further classified as seasonal working capital and special working capital. The capital required