Working capital

Gross Concept
Net Concept

 Gross working capital (firms investment in

Current Assets.
Current assets include cash, accounts
receivable, inventory, marketable securities,
prepaid expenses and other liquid assets that
can be readily converted to cash.

 Net working Capital (Current assets Current

Liabilities) can be ( ve) or (+ ve)
A company's debts or obligations that are due
within one year. Current liabilities appear on
the company's balance sheet and include
short term debt, accounts payable, accrued
liabilities and other debts.

 In International working management when

current assets move across the borders, the value
can change.

Factors changing the value

Exchange Rate
Inflation rate
Exchange control mechanism
The prevailing political position

Objective of working capital

Management
To determine the optimal size of current assets.
Mix of long and short term funds for financing the current
assets.

Optimisation of cash flows between parent and subsidiary

through smooth cross border flow.
Optimisation of financial and other transaction cost.
To obtain best possible exchange rate and circumvent forex
losses.

Two angles