Wcm
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This document discusses various concepts related to working capital management including gross working capital, net working capital, the operating cycle involving acquisition, manufacture and sale of products, permanent and variable working capital, dangers of excessive and inadequate working capital, determinants of working capital, the tradeoff between profitability and risk related to working capital, methods of financing working capital such as trade credit, bank credit, commercial papers and factoring, modes of security for financing, and approaches to working capital financing.
Wcm
- 2. Introduction Issues relating to management of Current Assets Working capital is all about Current Assets and the Current Liabilities. 01/05/11 Working Capital Mgt./CSK
- 3. Concepts of Working Capital Gross Working Capital It means total current assets Net Working Capital It means ca-cl or That part of ca which r financed with long term funds 01/05/11 Working Capital Mgt./CSK
- 4. Need for Working Capital Operating Cycle Phases Acquisition of resources Manufacture of the product Sale of the product 01/05/11 Working Capital Mgt./CSK cash receivables inventory
- 5. Permanent and Variable WC Dangers of Excessive WC; Inventory mishandling Defective credit policy Managerial inefficiency Speculative profit & liberal dividend 01/05/11 Working Capital Mgt./CSK
- 6. Dangers of inadequate WC Stagnation of growth Operating plans;difficult to implement Operating inefficiency; day to day commitments Utilization of FA; profitability Availing credit opportunities Reputation 01/05/11 Working Capital Mgt./CSK
- 7. Determinants of WC Nature of Business Production cycle Business cycle Credit policy Growth & expansion Operating efficiencies Price level changes 01/05/11 Working Capital Mgt./CSK
- 8. Trade-off between profitability & risk NWC has bearing on profitability & risk. Nature of trade-off Effect of level of CA on trade-off Effect of increase/ higher ratio Effect of decrease/ lower ratio Effect of level of CL on trade-off Effect of increase/ higher ratio Effect of decrease/ lower ratio Combined effect of changes in CA & CL on trade-off 01/05/11 Working Capital Mgt./CSK
- 9. Financing WC Trade credit Bank credit - cash credit/ OD - loans - bills discounting - term loans - letter of credit Commercial papers Factoring 01/05/11 Working Capital Mgt./CSK
- 10. Mode of security Hypothecation Pledge Lien Mortgage 01/05/11 Working Capital Mgt./CSK
- 11. Approaches to WC Financing Hedging approach Conservative approach 01/05/11 Working Capital Mgt./CSK