Working Capital Management

CONCEPT OF WORKING CAPITAL

Capital can be defined as the amount or money-worth of the properties of owners with which a business or venture was started.

Working capital is the amount by which a company meets its immediate commitments. It represents excess of Current Assets over Current Liabilities in an Organisation.

Application of Working capital

• Working Capita = Internal Capital

• It is the amount by which company meets immediate commitments. The amount is not externally dependent.

• It is internally or self generated fund available for running day to day operations of the business.

• From balance sheet perspective, it represents excess of current assets ( tangible ) over current liabilities of an organisation.

WORKING CAPITAL COMPONENTS

 Stock Management ( work in progress, Raw materials, finished goods)

 Debtor Management (Trade, staff)

 Creditor Management ( Trade or other creditors)

 Cash Management

 Prepayment

 Trade investments

 Bank

 Cash in hand

 Unpaid taxes

 Unpaid dividends

 Accruals

Inadequacy Working Capital Can be Obtained from the following sources :

• Bank credit ( Bridging Loan or Overdrafts)

• Acceptance credit

• Invoice discounting

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