CONCEPT OF WORKING CAPITAL

Working capital is the amount of capital that a business has

available to meet the day- to-day cash requirements of its
operations, or more specially, for financing the conversion of raw
material into finished goods, which the company sells for
payment.

WORKING CAPITAL MANAGEMENT

It is concerned with the problem that arise in attempting to

manage the current assets and liabilities and the inter relationship
that exists between them.
CLASSIFICATION OF WORKING CAPITAL

WORKING CAPITAL

BASIS OF CONCEPT BASIS OF TIME

Gross Net Permanent Fluctuating

working working /fixed
capital capital
/variable
working working
capital
capital
Current ratio Current assets AZHAR

Current liabilities

It gives a picture about the companies ability to pay back its liabilities with its short
term assets. It can give a sense o efficiency ocompany’s opearting cycle or its
ability to turn product into cash.

PARTICULARS 2009 2010

CURRENT ASSETS 30284 23019
CURRENT 24581 42812
LIABLITIES

CURRENT RATIO 1.23 0.53

QUICK RATIO AZHAR
Also known as acid test ratio. It measures a
company’s ability to meet short term obligations with
its most liquid assets.
=current assets-stock (quick assets)
current liablities

PARTICULARS 2009 2010

QUICK ASSETS 20863 38829
QUICK LIABILITIES 24581 42812
QUICK RATIO 0.84 0.90
STOCK TURNOVER RATIO ANAND
It shows how many the stock in the buiseness has been
sold. A quicker stock turnover ratio means that the firm
gets to maker profit on the stock quicker.

=cost of goods sold

stock

PARTICULARS 2009 2010

COST OF GOODS 7578.45 9411.31
SOLD
STOCK 4583.9 3717.6
RATIO 1.65 2.53
DEBTORS TURNOVER RATIO ANAND
= average debtors
Credit sales/365

PARTCULARS 2009 2010

WORKING CAPITAL TURNOVER RATIO MANSA
= Net sales
Net working capital

PARTICULARS 2009 2010

NET SALES 84460 115431
NET WORKING -1832 -12528
CAPITAL
RATIO -4610 -9.16
OPERATING CYCLE MANSA
RAW MATERIAL HOLDING PERIOD RICHA
=360 days x stock of raw material
Cost of raw material
PARTICULARS 2009 2010

RAW MATERIAL 83.53 47.35

HOLDING PERIOD
WIP HOLDNG PERIOD RICHA
=360 days x stock of WIP

Cost of goods manufactured

PARTICULARS 2009 2010
HOLDING PERIOD 19.57 42.85
DEBTORS COLLECTION PERIOD ROHAN
=360 days x debtors
Credit sales
PARTICULARS 2009 2010
COLLECTION 11.97 8.479
PERIOD
CREDITORS PAYMENT PERIOD ROHAN
360 DAYS X CREDITORS
Purchases

PARTICULARS 2009 2010

HOLDING PERIOD 48.53 73.5
FINISHED GOODS HOLDING PERIOD DIVANSHU
360 X Stock of finished goods
Cost of goods sold

PARTICULARS 2009 2010

HOLDING PERIOD 10.053 9.956
 2009 2010
RM Conversion Period 83.53 47.35
-Creditors payment period 48.53 73.5
WIP Holding Period 19.57 46.76
FG Holding Period 10.053 9.956
Debtors Collection Period 11.97 8.479

76.59 39.03

MANAS
RECOMMENDATIONS MANSA