Working Capital Calculation

May 19th, 2015
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Working capital typically means the firm’s holding of current or short-term assets such as cash, receivables, inventory and marketable securities.

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Presentation on WorkingCapitalByM.P. DEIVIKARANWorking capitalIntroduction Working capital typically means the firmsholding of current or short-term assetssuch as cash, receivables, inventory andmarketable securities. These items are also referred to ascirculating capital Corporateexecutivesdevoteaconsiderable amount of attention to themanagement of working capital.Definition of Working CapitalWorking Capital refers to that part of thefirms capital, which is required for financingshort-term or current assets such a cashmarketable securities, debtors andinventories. Funds thus, invested in currentassets keep revolving fast and areconstantly converted into cash and thiscash flow out again in exchange for otherConcept of working capitalThere are two possible interpretations ofworking capital concept:1. Balance sheet concept2. Operating cycle conceptBalance sheet conceptThere are two interpretations of workingcapital under the balance sheet concept.a.Excess of current assets overcurrent liabilitiesb. gross or total current assets. Excess of current assets over current liabilitiesare called the net working capital or net currentassets. Working capital is really what a part of long termfinance is locked in and used for supportingcurrent activities. The balance sheet definition of working capital ismeaningful only as an indication of the firmscurrent solvency in repaying its creditors. When f

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