WORKING CAPITAL MANAGEMENT DOC

Title	WORKING CAPITAL MANAGEMENT
Author	Kishore S
Pages	57
File Size	374.5 KB
File Type	DOC
Total Downloads	590
Total Views	922

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WORKING CAPITAL MANAGEMENT: INTRODUCTION: Effective financial management is the outcome, among many other things of proper, management of investment of funds in business funds can be invested for permanent or long- term purposes, such as acquisition of fixed assets, diversification and expansion of business, renovation or modernization of plants an machinery and research & development. Funds are also needed for short-term purpose, i.e., for current operations of the business, for example, in a manufacturing concern, procurement for raw material, payment if wages, general expenses. All the goods so manufactured in a given time period, may not be sold in that time frame itself. Hence, some goods remain in stock, like raw material, semi finished goods, finished marketable goods, etc., Funds are thus blocked in a various types of inventory. Every after, sales, may not necessarily be cash sales, even credit sales may be present. It again constitutes to blockage of funds. Working capital refers to a firm's investment in short-term assets, viz., cash, short- term securities, debtors, etc., It can also be regarded as that portion of the firm's total capital which is employed in short-term operations. It refers to all aspects of current assets and current liabilities. In simple terms, working capital is the investment needed or day-to-day operations. Change in its value or without affecting the operations of any firm. Current liabilities are those liabilities, which are intended to be paid within a year out of the current assets or the firm's earnings. The main aims f working capital management is to manage the current assets and current liabilities in such a way that satisfactory level of working capital is maintained. This is due to the fact that if working capital management of the firm is inefficient, it is likely to become insolvent or even may be forced to bankruptcy. The current assets should be large enough to cover its current liabilities to ensure a reasonable margin of safety. 1...