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Definition Working capital is the amount of funds necessary for the cost of operating the enterprise - Shubin
Types of Capital
Working Capital
(Day to day Budget)
Working Capital
Based on Balance Sheet
Gross WC (Quantitative) Net WC (Qualitative)
Raw materials, WIP & Fin. Goods Work in Progress Finished goods A/c Receivables (Sundry Debtors) Marketable securities Cash in hand, Cash at bank Accrued income, paid in advance
Bank Over Draft Outstanding expenses Bank interest A/c Payables (Sundry Creditors) Transportation, Electricity charges Repayment of ST loans Accrued expenses, Received in advance.
Net Working Capital: Current Assets (minus) Current Liabilities CA > CL : Positive NWC CA < CL : Negative NWC
Invoice Received
Cash Cycle
Operating Cycle
Fixed Capital
3. Inter relatedness
4. Volatility 5.Reversibility
Managerial inefficiency due to complacent mgt Inventory for speculative profit , Liberal dividend policy
Unable to meet day to day need, hence, operational inefficiency Under utilization of fixed assets leading to poor RoI, face tight supply terms