Intro Review - Study on Working Capital

8/8/2019 Intro Review - Study on Working Capital

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WORKING CAPITAL

The term working capital refers to the amount of

capital which is readily available to an

organization.

A measure of both a company's efficiency and itsshort-term financial health.

Working Capital is defined as the excess of

Current Assets over its Current Liabilities.

Working Capital (WC) = Current Assets (CA) Current Liabilities (CL)


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WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short

term financing are referred to as working capital

management.

Short term financial management concerned withdecisions regarding to CA and CL. Management

of Working capital refers to management of CA

as well as CL.


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OBJECTIVE

To study the cash flow of the firm.

To study the management of Current Assetsand Current Liabilities & the inter-relationshipthat exists between them.

To study about the capital structure of the firm,whose improvement can free up valuablefinancial resources.

To analyze about the inventories, accounts

receivables and payables as they plays animportant role in the management of workingcapital.

Suggestions for the working capitalmanagement.


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STUDY ON CASH FLOW

The goal of working capital management is to

ensure that the firm is able to continue its

operations and that it has sufficient cash inflow

to satisfy both maturing short-term debt andfuture operational expenses. Understanding a

company's cash flow health is essential to make

investment decisions.


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STUDY ON MANAGEMENT OF CA & CL

Another goal of Working Capital Management is

to manage the firm's Assets and Liabilities in

such a way that a satisfactory level of working

capital is maintained. This is so because if the firm cannot maintain a

satisfactory level of working capital, it is likely to

become insolvent and may even be forced into

bankruptcy. Working Capital Management is

concerned with the problems that arise inattempting to manage the Current Assets, the

Current Liabilities and the inter-relationship

that exists between them.


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WORKING CAPITAL DEFICIT

If current assets are less than current liabilities,

an entity has a working capital deficiency, also

called a working capital deficit. These involve

managing the relationship between a firm'sshort-term assets and its short-term liabilities.


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STUDY ON THE CAPITAL STRUCTURE

In the globalized market, a business faces lots of

pressures on costs and financing requirements

with more competition. So, when trying to attain

greater efficiency, it is important not to focus

exclusively on income and expense items, but to

also take into account the capital structure,

whose improvement can free up valuable

financial resources.


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FACTORS AFFECTING THE COMPOSITION OF

WORKING CAPITAL

Nature of Business

Nature of Raw materials used

Process Technology used

Nature of finished goods

Degree of competition in the market

Growth and expansion


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Intro Review - Study on Working Capital

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