FINANCIAL

MANAGEMENT
BY :-
GROUP 3
• SUMAN (15)
• ARCHANA JAYAN (54)
• NUSHI MAQSOOD (25)
• SHUBHAM BHARGAVA (44)
• ADITYA PRAKASH (4)
• RITU SINHA (34)
• ABHISHEK KUMAR(57)

MEMBERS …..
 TOPIC
WORKING CAPITAL
MANAGEMENT
CONCEPT
&
ITS TYPES
What Is Working Capital
• Working Capital refers to the Funds
required for carrying out the daily
expenses of the Business . It can be
calculated by Subtracting the Current
Liabilities from Current Assets .
WORKING CAPITAL
MANAGEMENT
Working capital management involves the
relationship between a firm's short-term assets and
its short-term liabilities. The goal of working
capital management is to ensure that a firm is able
to continue its operations and that it has sufficient
ability to satisfy both maturing short-term debt and
upcoming operational expenses. The management
of working capital involves managing inventories,
accounts receivable and payable, and cash.
Objectives of Working
Capital Management
• The goal of working capital management is
to manage the firm’s current assets and
current liabilities in such a way that a
satisfactory level of working capital
management is obtained.
• The interaction between the CA & CL is
the main theory of the Working Capital
Management .
Concept & Types
• There are 2 Concepts of Working Capital:-

1. Gross Working Capital

2. Net Working Capital
• Gross Working Capital –
Gross working capital refers to the total
current assets of a company .
The Gross Working Capital Concept
represents the funds available for
Operating Expenses which is concerned
with the TOTAL CURRENT ASSETS.
• Net Working Capital –

Net Working Capital = CA – CL

Net working capital is calculated by

subtracting the CA from CL . This Concept
helps in measuring liquidity & as well as
gives idea about how much to invest in
current assets.
Types
• On the basis of there needs , working capital is
mainly categorized into TWO types :-

1. Permanent Working Capital

2. Temporary Working Capital
• Permanent Working Capital :-

There is a need of having minimum level of current assets

at all times in order to carry on the business activities
effectively. This is referred to as the Permanent Working
Capital.
It is otherwise called as Fixed Working Capital.

IT CONSISTS OF 2 TYPES :
1. RESERVE WORKING CAPITAL
2. REGULAR WORKING CAPITAL
• Regular Working Capital:
The minimum amount of working capital to be maintained
in normal condition is called Regular Working Capital.

• Reserve Working Capital:

It is otherwise called as Cushion Working Capital. It
refers to the short term financial arrangement made by the
business units to meet uncertain changes or to meet
uncertainties.
The reserve working capital can be used in order to meet
the uncontrollable risks and sustain in the business world.
• Temporary Working Capital :-

In nutshell, temporary working capital is an extra

working capital required to support the changing
production and sales activities.
It is the additional working capital requirement
arising out of seasonal demand of the product or
any special event which otherwise are not
predictable.
Working Capital also consists of 2 Types :-
1. Seasonal Working Capital
2. Special Woking Capital

Seasonal Working Capital –

Some products have seasonal demand. Seasonal
demand arises due to festival. In this way, seasonal
working capital means an amount of working
capital maintained to meet the seasonal
demand of the product.
Special Working Capital:-

Special programmes may be conducted for

business development. The programmes may
be advertisement campaign, sales promotion
activities, product development
activities, marketing research activities, launching
of new products, expansion of markets and the like.
Therefore, special working capital means an
amount of working capital maintained to meet the
expenses of special programmes of the company.
What is the NEED ???
• A business needs certain amount of cash for meeting
routine payments, providing unforeseen events or
purchasing raw materials for its production. Managing
working capital includes managing cash, inventories,
accounts receivables and accounts payable in an effective
manner. In this way, a working capital is equal to the raw
materials, work in progress , finished goods inventories
and accounts receivables less accounts payable.
Some Important Points

• Cash Management
• Inventory Management
• Receivables Management