Professional Documents
Culture Documents
MANAGEMENT
DR. R.S.AURORA
PROFESSOR IN SOFT SKILLS,
CONTROL SYSTEMS AND STRATEGY
Dr.Rajinder S. Aurora 1
What is Capital?
Dr.Rajinder S. Aurora 2
Classification of Capital:
Dr.Rajinder S. Aurora 3
Working Capital is…
Dr.Rajinder S. Aurora 4
Current Assets and Current
Liabilities:
Current Assets Current Liabilities
represents assets represents claims of
which can be outsiders expected to
converted into cash in mature for payment
less than a year within a year
Dr.Rajinder S. Aurora 5
Concepts of Working Capital:
Dr.Rajinder S. Aurora 6
Working Capital Cycle
Sales
Dr.Rajinder S. Aurora 7
Adequacy of Working Capital:
Dr.Rajinder S. Aurora 8
Dangers of Excessive Capital:
Dr.Rajinder S. Aurora 9
Dangers of Inadequate Working
Capital:
• Stagnates growth
• Loss of reputation
Dr.Rajinder S. Aurora 10
Determinants of Working Capital:
• Manufacturing Cycle
• Sales Growth
• Demand Conditions
• Production Policy
Contd…
Dr.Rajinder S. Aurora 11
Contd…
• Availability of credit
Dr.Rajinder S. Aurora 12
Symptoms of Poor Working Capital
Management :
• Excessive inventory
• Slow down in collection from debtors
• Purchase of capital goods with working capital
resources
• Unplanned production schedules
• Inefficient use of trade credit
• Overtrading
• Dependency on short-term funds for permanent
working capital
• Inefficient cash management
• Inability to get working capital limits
Dr.Rajinder S. Aurora 13
Operating Cycle:
• Work-in-Process
Time
Accounts
payable
period
Invoice Cash paid
Received for Materials
Operating Cycle
Cash Cycle
Dr.Rajinder S. Aurora 15
Reasons for Prolonged
Operating Cycle:
• Purchase of materials in excess
• Buying inferior or defective materials
• Failure to get trade and cash discount
• Inability to purchase during seasons
• Defective Inventory policy
• Lack of production planning
• Use of outdated technology
• Defective credit policy
• Poor maintenance and upkeep
Dr.Rajinder S. Aurora 16
How to reduce
Operating Cycle?
• Purchase Management
• Production Management
Dr.Rajinder S. Aurora 17
Gross and Net Operating Cycle:
Dr.Rajinder S. Aurora 18
Components of Operating Cycle:
Dr.Rajinder S. Aurora 20
Permanent and Temporary
Working Capital:
Temporary
Permanent
Dr.Rajinder S. Aurora 21
ANY
QUESTIONS
PLEASE ???
Dr.Rajinder S. Aurora 22
THANK YOU
Dr.Rajinder S. Aurora 23