FINANCIAL

MANAGEMENT

A D IP
PR TY
A V O R
A K R
CH 6TH
C H 2
BAT
 WORKING CAPITAL

MANAGING FIXED ASSETS

LARGE HOLDING OF CURRENT ASSETS

LEVEL OF FIXED AS WELL AS CURRENT ASSETS

 CONCEPT

THERE ARE TWO MAIN CONCEPTS OF

WORKING CAPITAL
GROSS WORKING CAPITAL( CURRENT ASSETS)

NET WORKING CAPITAL ( CURRENT

LIABILITIES)
 CONT…..

POSITIVE (CURRENT ASSETS >CURRENT

LIABILITIES)

NEGATIVE (CURRENT ASSETS<CURRENT

LIABILITIES)
 CONT…..

SEASONAL BASED

PERMANENT OR FIXED WORKING CAPITAL

FLUCTUATING OR VARIABLE WORKING CAPITAL

 OPERATING CYCLE?.....

Operating cycle is the time duration required to convert

sales , after the conversion of resources into inventories,
into cash.

The operation cycle of a manufacturing company involves

these 3 phases:-

ACQUISITION OF RESOURCES
MANUFACTURING OF THE PRODUCT
SALE OF THE PRODUCT
OPERATING OPER ATING CYCLE OF A
CYCLE MANUFACTURING FIRM
INVOLVES
IN THE
CONVERSION
OF SALES
INTO CASH
 CREDIT DEBTOR
SALES
SALES CASH

COLLECTION
PRODUCTION OF CASH

PAYMENT
PURCHASE
CASH OF RW
CREDITOR CREDIT
 FACTORS/DETERMINANT
WORKING CAPITAL
A. NATURE OF BUSINESS
B. MARKET AND DEMAND CONDITIONS
C. TECHNOLOGY AND MANUFACTURING POLICY
D. CREDIT POLICY
E. AVAILABILITY OF CREDIT FROM SUPPLIERS
F. OPERATING EFFICIENCY
G. PRICE LEVEL CHANGES