Working Capital Calculation

May 19th, 2015
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Aberystwyth University
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1) Introduction 2) Need of working capital 3) Gross W.C. and Net W.C. 4) Types of working capital 5) Determinants of working capital

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1.1)IntroductionWorking Capital ManagementWorking Capital Management is concerned with the problem arise in attemping to manage the current assets, the current assets refers to the inter relationship that exist between them. The term Current assets refers to those assets which in ordinary course of business can be, or will be, turned in to cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware those liabilities which intended at there inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bank overdraft, and outstanding expenses.The goal of working capital management is to manage the firms current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.Definition:-According to Guttmann & Dougall- Excess of Current assets over current liabilities.According to park & Gladson- The excess of current assets of a business items owned to employees and others ( such as salaries & wages payable, accounts payable, taxes owned to government).1.2) Need of Working Capital ManagementThe need for working capit

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