WORKING CAPITAL

PRESENTED BY: PRAVEEN HV

MEANING
Working capital refers to short term
funds to meet operating expenses. It
refers to the funds which a company
must possess to finance its day to
day operations. It is concerned with
the management of the firms current
assets and current liabilities.

Constituents of Current Assets and

Current Liabilities
Current Assets- Inventories (Raw
materials , Work - in process,
Finished goods), Trade debtors, Loans
and advances, Investments, Cash
and bank balances
Current
LiabilitiesSundry
creditors, Trade advances, short term
Borrowings, etc

Concept of Working Capital

There are two concepts of working
capital:
Gross working capital
Net working capital

Gross working capital

The total of all current assets are
termed as gross working capital or
circulating capital
Significance of Gross Working Capital
Optimum investment in Current
Assets
Financing of Current Assets

Net working capital

The difference between current assets
and current liabilities is known as
net working capital.

Significance of Net Working Capital

Maintaining liquidity
To decide upon the extent of long
term capital in financing current
assets

Kinds of Working Capital

1.Concepts based
2.Time based

Need to maintain balanced Working

Capital
maximization of profit or
minimization of working capital cost
or to maintain balance between
liquidity and profitability there is a
need to maintain a balance in
working capital. It should not be
inadequate.

The dangers of excessive working

capital

It stagnates growth.
Difficult to implement production
It leads to inefficient utilization of
fixed assets.
It hampers the firms goodwill in
the market.

Factors influencing Working

Capital
Credit policy or terms of purchase
and sales
Business Cycle
Growth and expansion
Scarce availability of raw material

QUESTIONS
1. STATE THE MEANING OF WORKING
CAPITAL?
2. NAME THE CONCEPTS OF WORKING
CAPITAL?
3. WHAT ARE THE SIGNIFICANCE OF
WORKING
CAPITAL?
4. STATE THE DANGERS OF EXCESSIVE
WORKING CAPITAL?
5. WHAT ARE THE FACTORS INFLUENCES
WORKING CAPITAL?