...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 - Finance required to meet Capital Expenditure - Also, known as Fixed Capital Finance Short Term Sources of 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) (ii) Fixed / Permanent Working Capital (Regular & Reserve Margin/ Cushion WC) 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...
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...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...
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...understanding of the working capital management of IRCTC. This report will analysis and describe different ratios and how it manages its working capital. “It is meaningless to financially analyse a company without understanding the context and environment in which it operates”. As IRCTC has its monopoly in Indian Railways, so we will take a close look to intra firm analysis. A ratio is an arithmetical relationship between two figures. Financial ratio analysis is a study of ratios between various items or groups of items in financial statements. Ratios can be classified according to statements mainly they are profit and loss ratios or income statement ratios, balance sheet ratios or position statement ratios, mixed ratio or inter statement ratios The ratios are calculated with the help of Annual report of IRCTC provided by the company; the data of last five financial years has been used for that. The project begins with the discussion about the scenario of Indian Railway and role of IRCTC in that. The project then describes the main concept- Ratios and their analysis by determining that why the ratios have changed, which can be due to the change in the accounting policies without a material change in the firm’s performance. The focus of the project then shifts to Working capital which is concerned with the problems that arise in attempting to manage current assets, the current liabilities and the interrelationship between them. The goal of the working capital management is to manage...
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...Minimizing working capital is essential for a company in today’s economy. There are many reasons why minimizing working capital is important. With its importance, though, there are many challenges. The most important reason to minimize working capital is to maximize shareholder wealth. Nicholas Havoutis states, “Proactive working capital management is fundamental to a company’s ability to adapt in a challenging economy, because it’s a discipline firmly within an organization’s control that can be practiced independent of the current macroeconomic environment,” (2003). He goes on to say, “Cash management activities, once seen as managing cash inflows and outflows, are increasingly viewed as fundamental to enhancing shareholder value,” (2003). Another importance of minimizing working capital is “to ensure that the organization is able to find the difference between short-term assets and short-term liabilities,” (Capital Eyes). When minimizing working capital we are basically managing short-term assets and liabilities. This means cash, receivables, and payables. Successful cash management means increasing cash surplus to cover debt. There are three ways a company can increase their cash surplus in an effort to cover their debt. First, collect receivables faster. Second, get better credit terms from suppliers. Third, move inventory faster, (Capcut). “Good capital management practices can lead to the optimal management of short-term assets and...
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...Minimizing Working Capital Minimizing working capital is essential for a company in today’s economy. There are many reasons why minimizing working capital is important. With its importance, though, there are many challenges. The most important reason to minimize working capital is to maximize shareholder wealth. Nicholas Havoutis states, “Proactive working capital management is fundamental to a company’s ability to adapt in a challenging economy, because it’s a discipline firmly within an organization’s control that can be practiced independent of the current macroeconomic environment,” (2003). He goes on to say, “Cash management activities, once seen as managing cash inflows and outflows, are increasingly viewed as fundamental to enhancing shareholder value,” (2003). Another importance of minimizing working capital is “to ensure that the organization is able to find the difference between short-term assets and short-term liabilities,” (Capital Eyes). When minimizing working capital we are basically managing short-term assets and liabilities. This means cash, receivables, and payables. Successful cash management means increasing cash surplus to cover debt. There are three ways a company can increase their cash surplus in an effort to cover their debt. First, collect receivables faster. Second, get better credit terms from suppliers. Third, move inventory faster, (Capcut). “Good capital management practices can lead to the optimal...
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...FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT TECHNIQUES USED BY SMALL MANUFACTURERS: SURVEY AND ANALYSIS Morris Lamberson, University of Central Arkansas ABSTRACT This article summarized the responses of 103 small manufacturers to a mail questionnaire survey sent to the chief financial officer of 477 firms located in the southern region of the U.S. The major thrust of the paper was to provide insight into the importance of and utilization of financial analysis and working capital management concepts by small manufacturers. Findings from the study suggest that respondents considered financial analysis and working capital management to be important and most firms were heavy users of these concepts. While the findings were encouraging, a significant percentage of the small firms expressed little or no usage of the concepts. Academicians need to continue efforts to communicate to practitioners of the potential benefits of applying these financial management concepts. INTRODUCTION A frequent concern, expressed by those who develop collegiate finance curricula, is whether or not the financial concepts normally taught in undergraduate finance courses are actually utilized in the business world. While we recognize the fact that a gap will always exist between what is taught in the classroom and what is practiced in the business world, academicians have a responsibility to both students and financial managers to help bridge the gap between theory and practice. This concern over real...
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...Financial Analysis & Management Assignments 1. Discuss the extent to which the legal and professional regulatory framework of accounting ensures that corporate reports provide reliable, relevant, objective, and comparable information to users. 2. Critically evaluate the importance of discounted cash flow techniques in investment decisions. Illustrate your answer with your examples. 3. Discuss the relative importance profitability and liquidity for the survival of a business and explain how the working capital can be managed to minimise the risk of liquidity problems. Shahrzad Parhizgar Student Number: B0229JTJT1112 February 2013 Lecturer:PalanAmbikai Word Count: 2980 Financial Analysis & Management Assignments February 1, 2013 Table of Content LEGAL & PROFESSIONAL REGULATORY FRAMEWORKS ENSURING RELIABLE, RELEVANT, OBJECTIVE, AND COMPARABLE DATA ........................................................................................................................................ 3 INTRODUCTION ....................................................................................................................................................... 3 FINANCIAL INFORMATION USERS ................................................................................................................................ 3 LEGAL AND PROFESSIONAL REGULATORY FRAMEWORKS ................................................................................................. 4 FINANCIAL REPORTS...
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...Unit No.12 (Financial Management) Unit Code: AA/012/P013 Assignment Title: Expected Knowledge and Skills-- Finance Manager Assignment No. 12- AA/012/P013-IND Contents Acknowledgement 2 Task 1 3 What are the financial management and why it is necessary for an organization? 3 What are the financial objectives of the firm and how they are related to corporate strategy? 4 Corporate strategy is about the choices complete controls create regarding problems like the particular organization the company is in, whether new marketplaces would be joined or whether to take out from current marketplaces. These kinds of choices can commonly have substantial financial effects. If, for example, a decision is taken to enter a new manufacturing company, and current organization in that industry could be bought, or a new organization be started from the beginning (Van Horne, & Wachowicz, 2008). 5 How financial objective can be different in case of non for profit organization. 5 The financial objectives of the not-for-profit organization must agree with the objective of the organization and financial constraints. For example, if the not-for-profit organization is particularly pleased to be an organization, an organization increase national could cause you to lose its appeal. Compose a record of objectives that fit the objective of the not-for-profit organization and are possible objectives (Saunders, et. al. 2006). 6 Define the types of stakeholder a company have and...
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...Working Capital Management in a Post-Recession Environment: The View from Europe A report prepared by CFO Research Services in collaboration with The Royal Bank of Scotland TM Working Capital Management in a Post-Recession Environment: The View from Europe A report prepared by CFO Research Services in collaboration with The Royal Bank of Scotland TM Working Capital Management in a Post-Recession Environment: The View from Europe Contents Executive summary Cash, liquidity and credit during an uncertain recovery Pursuing improvements in working capital An opportunity to expand the toolkit Investing in working capital improvements Conclusion Sponsor’s perspective 2 3 5 7 11 12 13 © 2010 CFO PUBLISHING LLC SEPTEMBER 2010 1 Working Capital Management in a Post-Recession Environment: The View from Europe Executive summary In June and July of 2010, CFO Research Services (a unit of CFO Publishing LLC) conducted an electronic survey among senior finance executives representing mid-size to large companies in Europe. Our goal was to understand finance executives’ concerns with working capital management in the wake of global recession, as well as their plans for improving working capital performance. We asked finance executives a series of questions about the impact that the recession had on their working capital management, which areas of working capital their companies would focus on during the course of economic recovery and whom their companies worked...
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...Trends in Working Capital Management and its Impact on Firms’ Performance: An Analysis of Mauritian Small Manufacturing Firms Kesseven Padachi* A well designed and implemented working capital management is expected to contribute positively to the creation of a firm’s value The purpose of this paper is to examine the trends in working capital management and its impact on firms’ performance. The trend in working capital needs and profitability of firms are examined to identify the causes for any significant differences between the industries. The dependent variable, return on total assets is used as a measure of profitability and the relation between working capital management and corporate profitability is investigated for a sample of 58 small manufacturing firms, using panel data analysis for the period 1998 – 2003. The regression results show that high investment in inventories and receivables is associated with lower profitability. The key variables used in the analysis are inventories days, accounts receivables days, accounts payable days and cash conversion cycle. A strong significant relationship between working capital management and profitability has been found in previous empirical work. An analysis of the liquidity, profitability and operational efficiency of the five industries shows significant changes and how best practices in the paper industry have contributed to performance. The findings also reveal an increasing trend in the short-term component of working capital...
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...STUDY ON “WORKING CAPITAL MANAGEMENT “ AT DILIP MARETRIAL HANDLING EQUIPMENT BY SHARATH KUMAR CE 1NZ13MBA35 Submitted to VISVESVARAYA TECHNOLOGICAL UNIVERSITY, BELAGAUM In partial fulfillment of requirement for the award of degree of...
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...Finance / under West Bengal State University, Barasat) Title of the Project WORKING CAPITAL MANGEMENT IN MARUTI SUZUKI INDIA.LTD Submitted by Name of the Candidate: TANUMOY ROY Registration No. : 13611131114020870 OF 2011-12 Name of the College: RBC EVENING COLLEGE College Roll No: 21 Supervised by Name of the Supervisor MR RANJIT KUMAR DUTTA Name of the College: RBC EVENING COLLEGE Month & Year of Submission FEB 2014 ACKNOWLEDGEMENT I would like to thank our head of the department (HOD) Mr. Ranjit Kumar Dutta, for giving necessary support during the course. Chapter No. | Particulars | Page No. | 1. | INTRODUCTION | 4-7 | 2. | AUTOMOBILE INDUSTRY SCENARIO IN INDIA | 8 | 3. | PRESENTATION OF DATA, ANALYSIS, FINDING | 9-11 | 4. | CONCLUSION,RECOMMENDATION,LIMITATION | 12 | 5. | BIBLOGRAPHY AND REFERANCES | 13 | 6. | SUPERVISER CERTIFICATE | 14 | 7. | STUDENT DECLARATION | 15 | CONTENTS INTRODUCTION 1.1CONCEPT OF WORKING CAPITAL The term working capital is used to mean that proportion of working capital of a business which is employed in short Term or current operations. There are two type of working capital: gross and net. Gross working capital is the sum total of all current asset, while net working capital is the difference between current asset and current liabilities. IMPORTANCE OF WORKING CAPITAL * The business can avail the advantages of cash discount facilities offered...
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...finance in emerging markets is a complex field for managers and academics. Most of the models used in investments and corporate finance have been developed under the assumption of at least moderately efficient markets, but this assumption seems to be questionable when moving to less developed markets. Emerging markets are not efficient markets; they are characterized by higher information asymmetries, higher transaction costs, more concentrated ownership, lack of market development, relatively low market liquidity, etc. Additionally, there are relevant differences in terms of suitability for the use of standard corporate finance techniques in the context of small and medium private enterprises. The present survey examines capital budgeting, cost of capital, capital structure and dividend policy decision of the four firms namely Schmit telecom, Sanehwal fasteners, LPS limited and Bharathi Soap works. The study analyses the responses conditional on firm characteristics. It examines the relationship of the executives' response with firm size, profitability, risk, growth, CFO's education, and the sector. By testing whether responses differ across these characteristics, the study throws light on the implications of various finance theories concerning firm size, risk, and growth. The survey also given us the knowledge about practices followed by different companies depending on the sector in which they exist. Market position has also played significant role in determining the companies...
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...FINANCIAL STRUCTURE AND STATEMENTS Importance of Financial Structure and Statements [Student Name] [Course Title] [Instructor] [Date] Importance of Financial Structure and Statements Introduction This essay discusses the role of financial structures on the profitability and stability of companies and the role of financial statements prepared using historical cost convention and accruals concept in the decision making process. Both aspects of companies discussed here are of much importance as they directly affect companies, their financial condition and the representation of facts to the relevant users. The financial structure of a company reflects various sources the company has used to finance its operations. The financial statements provide vital information to users such as shareholders, managers, banks, tax authorities and research analysts to make important decisions. Financial Structure The financial structure of a firm is the way the assets and operations are financed. A company employs various modes of financing to acquire assets and support its operations. The financial structure includes components such as short term liabilities, long term debt and shareholders’ equity. Financial structure is different from capital structure as the capital structure only includes long term debt and shareholders’ equity and ignores short term liabilities. More successful companies focus more on financial structure rather than capital structure as the analysis of financial...
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...jenkins2@waldenu.edu Student ID # A00551485 Program: Ph.D. MGMT - Human Resource Management Introduction From small to large organizations, the functions of a human resource department are an essential piece in helping organize and manage the personnel that helps to keep an organization running. A Human resource department performs functions that encompass a variety of activities. Significantly influencing all areas of an organization such as Human Resource Planning, Recruitment, and Selection, conducting job analyses to establish the specific requirements of individual jobs within the organization, and forecasting the human resource requirements the organization needs to achieve its objectives just to name a few. In just recruiting alone the human resources department has a duty to also look at retention rates, complaints and terminations of employees which allow them to analyze as to what programs work and what do not. Human Resource Research utilizing human resource information database are able to conduct surveys, utilize questionnaires with direct and indirect control questions, or just take a show of hands to determined. If current systems work, what the employees want verses what the employer needs, and establish a system that will benefit not only the employer but also the employees. The examination of eight various articles will look at the various research methods that are used to manage human capital, how they work and how there is room for improvement. Purpose Statement...
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