Working Capital Calculation

May 19th, 2015
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Aberystwyth University
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Decisions relating to working capital and short term financing are referred to as working capital management. As profits earned depend upon magnitude of sales and they do not convert into cash instantly, thus there is a need for working capital in the form of CA so as to deal with the problem arising from lack of immediate realization of cash against goods sold.

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WORKINGCAPITALPrepared By :Anju BhardwajINTRODUCTIONWorking CapitalWorking Capital ManagementNeed for Working CapitalDeterminants of Working CapitalWORKING CAPITALCurrent assets Current liabilitiesIt measures how much in liquid assets a company hasavailable to build its business.A short term loan which provides money to buy earningassets.Allows to avail of unexpected opportunities.Positive working capital is required to ensure that a firm isable to continue its operations and that it has sufficientfunds to satisfy both maturing short-term debt andupcoming operational expenses. The management ofworking capital involves managing inventories, accountsreceivable and payable and cash.An increase in working capital indicates that the businesshas either increased current assets (that is received cash,or other current assets) or has decreased current liabilities,for example has paid off some short-term creditors.WORKING CAPITALMANAGEMENTDecisions relating to working capital and short termfinancing are referred to as working capitalmanagement.Short term financial management concerned withdecisions regarding to CA and CL.If current assets are less than current liabilities, anentity has a working capital deficiency, also called aworking capital deficit.These involve managing the relationship between afirm's short-term assets and its short-term liabilities.The goal of worki

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