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Project Report - Working Capital Management
WORKING CAPITAL - Meaning of Working Capital
[pic][pic][pic][pic][pic]Capital required for a business can be classified under two main categories via, 1) Fixed Capital 2) Working Capital Every business needs funds for two purposes for its establishment and to carry out its day- to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that part of firm’s capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purposes for the purchase of raw material, payment of wages and other day – to- day expenses etc. [pic][pic][pic][pic][pic]These funds are known as working capital. In simple words, working capital refers to that part of the firm’s capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital: 1. Gross working capital 2. Net working capital The gross working capital is the capital invested in the total current assets of the enterprises current assets are those Assets which can convert in to cash within a short period normally one accounting year. CONSTITUENTS OF CURRENT ASSETS 1) Cash in hand and cash at bank 2) Bills receivables 3) Sundry debtors 4) Short term loans and

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