Working Capital Calculation

May 19th, 2015
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Aberystwyth University
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The working capital can also be divided into categories (i) Fixed working capital and (ii) Fluctuating working capital. Every business requires some amount of working capital in spite of the level of operations, throughout the year. This amount represents the fixed amount of working capital.

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INTRODUCTION TO WORKING CAPITAL1.1 OBJECTIVES OF THE STUDY To find out the investment needs in current assets to sustain the business operations.To find out the percentage increase or decrease (trend analysis) of working capital for the given 5 years.To strike off a Balance between financial stability and profitability through its working capital estimation. To find out the financial position and solvency of the company by calculating the ratios.1.2 METHODOLOGY OF THE STUDY1. Library reference i.e. primary data collection 2. Select an organization 3. Procurement of data Estimation of working capital Trend Analysis Ratios relating to working capital THEORY OF WORKING CAPITAL2.1 INTRODUCTIONThe management of fixed assets and current assets differ from each in three main aspects as given below a) Time factor plays a minor role in managing current assets while it plays a major role in managing fixed assets. Fixed assets management presents values of expected future cash inflows and outflows.b) If a firm maintains a large holding of current assets, in cash, the risk is reduced, but it also reduces the overall profitability.c) Though the fixed and current assets levels depend upon sales, only current assets can be adjusted with sales fluctuations.The importance of working capital management is reflected in the fact that financial managers spend a great deal of time in managing current assets and current liabilities. Arranging short-term financing, neg

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