DETERMINANTS OF WORKING

CAPITAL
By
G. Shamitha (13241E0033)

G. Mounika (13241E0036)
M. Keerthana (13241E0058)

WORKING CAPITAL
There are two concepts of working capital
Gross working capital : the current assets which
represents the proportion of investment that
circulates from one form to another.
Net working capital : The difference between
current assets and current liabilities.

NEED FOR WORKING CAPITAL

As, the sales do not convert into cash
immediately, there is invariably a time lag
between the sales of goods and the receipt of cash.
Therefore a need of working capital in the form of
current assets is necessary

DETERMINANTS OF WORKING
CAPITAL

General nature of business

Production cycle

Business cycle

Production policy

Credit policy

Growth and expansion

Vagaries in the availability of raw material

Profit level

Level of taxes

Dividend policy

Depreciation policy

Price level changes

Operating efficiency

GENERAL NATURE OF BUSINESS

Enterprises fall into some broad categories
depending on the nature of business.
The two relevant features are
Cash nature of business i.e., cash sale
Sale of services rather than commodities

PRODUCTION CYCLE
The term production or manufacturing cycle refers
to the time involved in the manufacturing of
goods.
It covers the time span between the procurement
of raw materials and the completion of the
manufacturing process leading to the production
of finished goods.

BUSINESS CYCLE
Business fluctuations lead to the cyclical and
seasonal changes causes a shift in working capital
position.
The variation in business conditions may be in
two directions
i)upward phase- when boom conditional
prevail.
ii) Downward phase- when economic activity is
marked decline.