Archive | Working Capital

How to Calculate Working Capital? (With Formula)

The following article will guide you about how to calculate working capital. One of the important objectives of working capital management is by maintaining the optimum levels of investment in current assets and by reducing the levels of current liabilities, the company can minimize the investments in working capital thereby improvement in return on capital […]

Working Capital Management Strategies

The following points highlight the top approaches of working capital management strategies. They are:- 1. Conservative Approach 2. Aggressive Approach 3. Matching Approach 4. Zero Working Capital Approach 5. Working Capital Policies. 1. Conservative Approach: A conservative strategy suggests not to take any risk in working capital management and to carry high levels of current […]

Working Capital: Meaning and Components | Business

In this article we will discuss about:- 1. Meaning of Working Capital 2. Components of Working Capital 3. Gross and Net Working Capital 4. Permanent and Temporary Working Capital 5. Positive and Negative Working Capital 6. Objectives. Meaning of Working Capital: Working capital management is a significant in financial management due to the fact that […]

Operating Cycle and Its Functions | Working Capital

In this article we will discuss about operating cycle and its functions. Working capital is the life blood of any business, without which the fixed assets are inoperative. Working capital circulates in the business, and the current assets change from one form to the other. Cash is used for procurement of raw materials and stores […]

Overtrading and Under Capitalization | Working Capital

In this article we will discuss about the impact of overtrading, under capitalization on working capital. Impact of Overtrading on Working Capital: Overtrading arises when a business expands beyond the level of funds available. Overtrade means an attempt to finance a certain volume of production and sales with inadequate working capital. If the company does […]

Working Capital Requirement of a Business

In this article we will discuss about the working capital requirements of a business. Factors Determining Working Capital Requirement: There is no set of universally applicable rules to ascertain working capital needs of a business organization. The factors which influence the need level are discussed below: a. Nature of business: If we look at the […]

Top 10 Sources of Working Capital Finance | Business

The following points highlight the top ten sources of working capital finance. The sources are: 1. Intercorporate Loans and Deposits 2. Commercial Paper (CP) 3. Funds Generated from Operations 4. Retained Profit 5. Depreciation Provision 6. Amortisation Provisions 7. Deferred Tax Payments 8. Accrued Expenses 9. Deposits and Advances 10. Public Deposits. Source # 1. […]

Top 3 Methods of Working Capital Estimation | Firm

The following points highlight the top three methods of working capital estimation. The methods are: 1. Percentage of Sales Method 2. Regression Analysis Method 3. Operating Cycle Method. 1. Percentage of Sales Method: It is a traditional and simple method of determining the level of working capital and its components. In this method, working capital […]

Working Capital: Meaning, Concepts and Diagrams

The below mentioned article provides a study note on Working Capital:- 1. Meaning of Working Capital 2. Concepts of Working Capital 3. Permanent and Temporary 4. Adequate but Not Excessive. Meaning of Working Capital: Working capital is that part of a firm’s capital which is required to hold current assets of the firm. Examples of […]

Determining Working Capital Requirements

The following points highlight the twelve major factors determining working capital requirements. The factors are: 1. Nature of Business 2. Size of Business 3. Manufacturing Cycle 4. Production Policy 5. Business Cycles 6. Conditions of Supply of Raw Material 7. Terms of Credit to Customers 8. Credit from Suppliers 9. Stock Turnover Ratio 10. Price […]

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