A Study on

Working Capital
Management
WORKING CAPITAL
 The term working capital refers to the amount of capital
which is readily available to an organization.
 A measure of both a company's efficiency and its short-
term financial health.
 Working Capital is defined as the excess of Current
Assets over its Current Liabilities.
 Working Capital (WC) = Current Assets (CA) – Current
Liabilities (CL)
WORKING CAPITAL MANAGEMENT
 Decisions relating to working capital and short term
financing are referred to as working capital management.
 Short term financial management concerned with
decisions regarding to CA and CL. Management of
Working capital refers to management of CA as well as
CL.
OBJECTIVE
 To study the cash flow of the firm.
 To study the management of Current Assets and
Current Liabilities & the inter-relationship that exists
between them.
 To study about the capital structure of the firm, whose
improvement can free up valuable financial resources.
 To analyze about the inventories, accounts receivables
and payables as they plays an important role in the
management of working capital.
 Suggestions for the working capital management.
STUDY ON CASH FLOW
 The goal of working capital management is to ensure
that the firm is able to continue its operations and that it
has sufficient cash inflow to satisfy both maturing short-
term debt and future operational expenses.
Understanding a company's cash flow health is essential
to make investment decisions.
STUDY ON MANAGEMENT OF CA & CL
 Another goal of Working Capital Management is to
manage the firm's Assets and Liabilities in such a way
that a satisfactory level of working capital is maintained.
 This is so because if the firm cannot maintain a
satisfactory level of working capital, it is likely to
become insolvent and may even be forced into
bankruptcy. Working Capital Management is concerned
with the problems that arise in attempting to manage the
Current Assets, the Current Liabilities and the inter-
relationship that exists between them.
WORKING CAPITAL DEFICIT
 If current assets are less than current liabilities, an entity
has a working capital deficiency, also called a working
capital deficit. These involve managing the relationship
between a firm's short-term assets and its short-term
liabilities.
STUDY ON THE CAPITAL STRUCTURE
 In the globalized market, a business faces lots of
pressures on costs and financing requirements with more
competition. So, when trying to attain greater efficiency,
it is important not to focus exclusively on income and
expense items, but to also take into account the capital
structure, whose improvement can free up valuable
financial resources.
FACTORS AFFECTING THE
COMPOSITION OF WORKING CAPITAL
 Nature of Business
 Nature of Raw materials used

 Process Technology used

 Nature of finished goods

 Degree of competition in the market

 Growth and expansion