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LCM-MBA Summer Training Project SAIL WC

LCM-MBA Summer Training Project SAIL WC

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Published by Manoj Kumar Yadav
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Published by: Manoj Kumar Yadav on Jan 22, 2011
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06/19/2014

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CHAPTER - 1
 
INTRODUCTION
 
WORKING CAPITAL CONCEPTS
1.1Business activity
Business activity is dynamic in character and subject to wide fluxions.The movement from working capital to income and profits and back toworking capital is one of the most important characteristics of business administration. This operation is concerned with thedeployment of funds with the hope that they will generate returns,rendering an additional amount called profit. If the operations of anenterprise are to run smoothly, proper relation ship between fixedcapital and current capital must be maintained. Its main aim is to usebusiness funds in which a manner that earning are maximized.Financial Management provided a framework for selecting a proper 
 
course of action and deciding a viable commercial strategy. Thisobjective can be achieved by :-
a)Profit maximizationb)Wealth maximization
Funds are needed for short-term as well long term purposed. Inshort term we say current operation of the business. For amanufacturing unit payment for raw materials and wages and for meeting routine expenses. All the goods. Which are manufactured ina given time, may not be sold in the period. Naturally funds areblocked in inventory. It is also the fact that all goods may not be soldagainst ready cash. Some of the goods may be sold on credit basis.The capital is closely related to the term funds and has two meaning.It is used to mean current assets minus current liabilities. In simplewords it is the investment needed for carrying out day-to-dayoperations of the business smoothly.It may be clear that objective of working capital management is tomaintain a satisfactory level of working capital. In other words, thecurrent assets should not be sufficient enough to cover the currentliabilities but at the same time it should also ensure the reasonableamount of safety margin. This is possible only when the differentcomponents of working capital are properly balanced
.
Working Capital Concepts
There are two concepts of working capital

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