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  • Overview of Working Capital Management Overview of Working Capital Management

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    subhasedu
    63 vizualizări10 pagini
    This document provides an overview of working capital management. It defines key terms like gross working capital, net working capital, current assets, and current liabilities. It also explains that working capital management involves investing in current assets and financing those current assets either through short-term or long-term financing. The document discusses approaches to working capital management like the hedging approach and risks vs costs trade-off approaches and how they differ in their use of short-term versus long-term financing.

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    WCM Presentation

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    This document provides an overview of working capital management. It defines key terms like gross working capital, net working capital, current assets, and current liabilities. It also explains that working capital management involves investing in current assets and financing those current assets either through short-term or long-term financing. The document discusses approaches to working capital management like the hedging approach and risks vs costs trade-off approaches and how they differ in their use of short-term versus long-term financing.

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPT, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    63 vizualizări10 pagini

    Overview of Working Capital Management Overview of Working Capital Management

    Încărcat de

    subhasedu
    This document provides an overview of working capital management. It defines key terms like gross working capital, net working capital, current assets, and current liabilities. It also explains that working capital management involves investing in current assets and financing those current assets either through short-term or long-term financing. The document discusses approaches to working capital management like the hedging approach and risks vs costs trade-off approaches and how they differ in their use of short-term versus long-term financing.

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPT, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 10

    Overview

    Overview of
    of Working
    Working
    Capital
    Capital Management
    Management

    Composed by:
    Subhas. Chakrabarti
    M.Com., M.Phil. (Accounting & Finance)

    1
    Working Capital Management:
    An Overview
    ◆ Gross Working Capital =(Current Assets)
    ◆ Net Working Capital = (Current Assets - Current Liabilities)
    ◆ Working Capital Management
    ◆ Involves investing in current assets and financing of
    current assets:

    C u r r e n t A s s e t
    I n v e s t m e n t

    C u r r e L n o t n g - T e r m
    L i a b i l i F t i ie n s a n c i n g
    2
    Working Capital
    Capital required to run an organization or that part of capital which is
    blocked in assets arising out of the ordinary course of business of the
    organization

    CURRENT ASSETS CURRENT LIABILITIES


    Assets that are converted into cash in the Liabilities that are payable in the ordinary
    ordinary course of business within 1 year course of business within 1 year

    Gross Working Capital


    Net Working Capital
    ∑ CA ∑CA - ∑ CL

    3
    Permanent Working Capital
    AMOUNT ( Rs.)

    Permanent current assets

    TIME
    4
    Temporary Working Capital

    Temporary current assets


    AMOUNT (Rs.)

    Permanent current assets

    TIME
    5
    Hedging (Matching) Approach

    Short-term financing**

    Current assets*
    AMOUNT (Rs.)

    Long-term financing
    Fixed assets

    TIME
    6
    Hedging (Matching) Approach

    Short-term financing**
    DOLLAR AMOUNT

    Current assets*

    Long-term financing
    Fixed assets

    TIME
    7
    Risks vs. Costs Trade-Off
    (Conservative Approach)

    Short-term financing

    Current assets
    AMOUNT

    Long-term financing
    ( Rs.)

    Fixed assets

    TIME
    8
    Risks vs. Costs Trade-Off
    (Aggressive Approach)

    Short-term financing
    AMOUNT (Rs.)

    Current assets

    Long-term financing
    Fixed assets

    TIME
    9
    Summary of Short- vs. Long-
    Term Financing
    Financing
    Maturity
    SHORT-TERM LONG-TERM
    Asset
    Maturity

    SHORT-TERM Moderate Low


    (Temporary)
    Temporary Risk-Profitability Risk-Profitability

    LONG-TERM High Moderate


    (Permanent) Risk-Profitability Risk-Profitability
    Permanent
    10

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