Saturday, August 2, 2014

Working Capital Management

 Working capital is the funds invested in current assets, i.e. investment in stocks , sundry debtors, cash & other current assets. Current assets are important to use fixed assets profitability. For expl., a machine cannot be used without, raw material. The investment on the purchases of raw material is defined as working capital. It is oblivious, that a certain amo. Of funds, is always tied up in raw material inventories, WIP, finished goods, consumable stores, sundry debtors & day to day cash requirements, However, the businessman also use credit facilities from his suppliers who may supply raw material on credit. Similarly, a entity may not pay immediately for various expenses. For expl., the laborers’ are paid only periodically , therefore, a certain amount of funds is automatically available to finance the currents assets requirenets. However, the requirements for current assets are usually greater than the amo. Of funds, payable through current liabilities, In other words, the CA are to be kept at a higher level than, the current liabilities

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