wc final ppt 1 april

7/28/2019 WC Final Ppt 1 April

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WORKING CAPITAL

MANAGEMENT

PRESENTED BY:-

Priyanka Garale-15

Ankita Patil- 07Salma Qureshi- 23

Mitali Goregoankar- 22

Sachin Nagargoje-42


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What is a capital

Cash or goods used to

generate income either

by investing in a

business or differentincome property.


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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 & capitalinvested for such purposes are called as working

capital.


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What is working capital.???

Working capital typically

means the firms holding of

current or short-term assets

such as cash, inventory andmarketable securities.

The capital of a business that isused in day to day operations.


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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.


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How working capital iscalculated???

Working capital= current assetscurrent liabilities


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STATEMENT OF WORKIG CAPITALParticulars Amount (Rs.)

CURRENT ASSESTS

i) Stock of raw materials XX

ii) Work in progress XX

iii) Stock of finished goods XX

iv) Sundry debtors XX

v) Payments in advance XX

vi) Balance of cash of daily expenses XX

vii) Any other item XX

LESS: CURRENT LIABILITIES

i) Creditors XXii) Lag in payment of expenses XX

iii) Any other item XX

WORKING CAPITAL ( C.ACL) XXX

Add : provision / margin for contingencies XX

NET WORKING CAPITAL REQUIRED XXX


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Effects of Excess working capital

Every business concern should have adequate working capital

to run its business operations.

It should have neither excess working capital nor inadequate of

working capital.

Both excess as well as shortage of working capital situations

are bad for any business.

However, out of the two, shortage of working capital is more

dangerous from the point of view of the firm.


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Importance of working capital

It enables the company to meet itsobligations.

Ensures the solvency of the

company.

Enables the organization to tide

over difficult periods successfully

Enhances the good will of the

company.


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Effects of inadequate working capital

Fixed Assets cannot efficiently and effectively beutilized on account of lack of sufficient workingcapital.

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 cashdiscount.


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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


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Working capital cycle

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

business


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There are two elements in the business cycle that

absorb cash - Inventory (stocks and work-in-

progress) and Receivables (debtors owing you

money).

The main sources of cash are Payables (yourcreditors) and Equity and Loans.

Each component of working capital (namely

inventory, receivables and payables) has two

dimensions ........TIME ......... and MONEY


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Working capital management

Working capital management is concerned with the problemsthat 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.


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3. Current liabilities: Obligations that have to be paid in a single

accounting period. E.g., accounts payable, bills receivable,

bank over-draft 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.


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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.


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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

Long-term loans


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Objectives of working capital management

To ensure the maintenance of satisfactory level of workingcapital.

To minimize the amount of capital employed in financing thecurrent assets.

To maintain the balance between the amount of currentassets & current liabilities.


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Need of working capital in different industries

Real estate and engineering sectors involve

projects which take a long time to complete,resulting in long inventory holding periods.

The gems & jewelers industryimports rough

diamonds, and exports the polished diamondswhich translate into longer inventory andreceivable days.

The sugar and textile sectors longer workingcapital cycles are due to their dependence oncommodity-based inputs which are seasonal innature and necessitate their storage.


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Working capital management in reliance : Hisar project

Hisar is the project of reliance infrastructurelimited, India


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There are three main areas in working capitalmanagement of RIL & they are :

1.Receivables management: RIL manages itsreceivable accounts through ageing analysis

2.Cash management: RIL manages its cashthrough management information system.

3.Inventory management: Inventorymanagement is made easier through theprocess of high sea sales and sale in transit.


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Thank You

wc final ppt 1 april

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