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01 Working Capital - SRB 2003

01 Working Capital - SRB 2003

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Published by vamilkanthwar

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Published by: vamilkanthwar on Sep 08, 2010
Copyright:Attribution Non-commercial


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The analogy has often been made that cash is the lifeblood of any business. Takeit away and the business will surely expire. A transfusion will miraculously bring the patient back from the brink of death, but only if,
The blood is of the right kind
The problem causing the leakage is attended to.Many companies are interested in increasing their profits. However, very fewcompanies worry about managing the Working Capital. Many companies fail due to bad management of Working Capital. They may be profitable, but they are not able to pay their bills.Cash is the lifeline of a company. If this lifeline deteriorates, so does thecompany’s ability to fund operations, reinvest and meet capital requirements and payments. Understanding Company’s cash flow is essential to make investmentdecisions. A good way to judge a company’s cash flow prospects is to look at itsWorking Capital Management. The better the company manages its Working Capital,the less the company needs to borrow. Even companies with cash surpluses need tomanage Working Capital to ensure that those surpluses are invested in ways that willgenerate suitable returns for investors.Working Capital Management involves the relationship between a company’sshort term assets and its short term liabilities. The goal of Working CapitalManagement is to ensure that a company is able to continue its operations and that ithas sufficient ability to satisfy both maturing short term debt and upcomingoperational expenses. The management of Working Capital involves managinginventories, accounts receivable and payable and cash management.Thus, an attempt has been made to study the management of Working Capital.
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Finance is the life-blood of business, like human body. Without blood there isno meaning of human body, like this without finance there is no means to business.The main and basic objective of business organization is to earn profit and managefunds in a proper manner. For achieving this objective, funds are required. After theserising, investing funds in the right place so as to incur more benefits. Many timesmanagement fails because of decision making. Before proceeding to examine theallocation and rising of funds, tools of analysis are important. In allocation and raisingfunds, the finance manager uses certain tools of analysis, planning and control. Acompany is deemed to be financially sound if it’s in position to carry on its businesssmoothly and meet the obligations, both short term as well as long term. Requirementof funds for short term should be met out from short term funds and long termrequirement should be met out from long-term funds.
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