MANAGEMENT OF WORKING CAPITAL
1. Meaning and Types of Finance:
Finance
- Finance is the Art & Science of Managing Money
- Finance is the Art of passing currency from hand to hand until it finally disappears

Types & Sources of Finance
____________________________________________________________________
Long Term Sources of Finance

Short Term Sources of Finance

- Finance required to meet Capital Expenditure
- Also, known as Fixed Capital Finance

- Finance required to meet day-to-day Business requirements
- Also, known as Working Capital Finance

2. Working Capital Management:
Working Capital (WC)
________________________________________________________________________________________
Basics regarding WC
-

Meaning of WC
Working Capital Concept
Factors Affecting WC
Meaning of WC Management
Importance of WC Management

Classification/Type of WC
A On the Basis of Concept
(i)
(ii)

Gross Working Capital
Net Working Capital
(Positive & Negative Working Capital)

Methods of estimating WC
-

Conventional Method
Operating Cycle Method
Cash Cost Method
Balance Sheet Method

B On the Basis of Periodicity
(i)

Fixed / Permanent Working Capital
(Regular & Reserve Margin/ Cushion WC)

(ii)

Variable Working Capital
(Seasonal & Special Working Capital)

Parag Nalin Doshi

1/12/2009

www.CAalley.com

Meaning 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
- Working Capital is the difference between resources in cash or readily convertible into cash (Current Assets) and organizational commitments for which cash will soon be required (Current Liabilities)
- It refers to the amount of Current Assets that exceeds Current Liabilities (i.e. CA - CL)
- Working Capital refers to that part of the firm’s Capital, which