Working Capital Management

BY: Subhankar samal

 INTRODUCTION
 Definition: Working capital management refers to a company's managerial
accounting strategy designed to monitor and utilize the two components
of working capital, Current assets and Current liabilities, to ensure the most
financially efficient operation of the company.

Funds required for short term purposes or for meeting day to day expenses of
business are called working capital.

It is a short term finance which is used to invest in current assets.

It is also called Revolving capital or Rotating capital or Short term capital.
Objective of Working capital Management

• The goal of working capital management is to manage the

firms current assets and liabilities in such a way that a
satisfactory level of working capital is maintained.
• The interaction between current assets and current liabilities
is, therefore the main theme of the theory of the working
capital management.
Types/kinds of working capital
• On the basis of concept • On the basis of need

 Gross working capital

 Permanent working capital
 Net working capitalize
 Temporary working capital
 Gross working capital is the sum total
of all the current assets of a company,
whereas net working capital is the
difference between the current assets
and the current liabilities of a
company
COMPONENTS OF WORKING
CAPITAL
Current assets:
These are those assets which converts into cash within one year.
These includes
Inventory
Debtors
Bills Receivables
Cash and Bank balances
Prepaid expenses
Current liabilities:
These are those liabilities which are to be paid within one year.
These includes
Creditors
Bills payable
Bank overdraft
Proposed dividend
Provision for taxation
CALCULATION OF DURATION OF
OPERATING CYCLE
DURATION OF RAW MATERIAL STORAGE
+
DURATION OF WORK IN PROGRESS
+
DURATION OF FINISHED GOODS
+
DURATION OF RECEIVABLES FROM DEBTORS
-
DURATION OF CREDIT PERIOD ALLOWED BY THE SUPPLIERS

O =R+W+F+D-C
TECHNIQUES OF ANALYSING
WORKING CAPITAL
The analysis can be conducted through using
following tools.
Fund flow analysis
Working capital budgeting
Ratio analysis
CONCLUSION

 Good management of working capital shall ensure that a

business has the cash and resources available to have
successful and healthy business operations and meet its
current liabilities without which a company shall always
be under the risk of having a working capital deficit
thereby hampering its business operations.
THANK YOU