2. • Concerned with management of current assets
• Short-term decisions are taken
• Moves around day to day operations
• Unlike fixed assets,time plays a minor role
• Unlike fixed assets,greater flexibilty
• Risk-return trade off

3. Definition – Working Capital
• Working Capital refers to that part of the firm’s capital, which
is required for financing short-term or current assets
Cash
Marketable Current
Securities Debtors
Assets
Inventories

4. Expert’s Views

6. Total Current
Asssets
Gross
WC
Positive NWC = CA > CL Balancesheet
Negative NWC = CA < CL
Concept
Net
WC
Current Assets
- Current Liabilities

7. Accounts Payable
Raw
Materials WIP
Cash Finished
Goods
Accounts Sales
Receivable

8. Purchase Sell Receive
Pay for Cash
resources Resources Product
purchases On credit
Inventory Receivable
conversion Conversion period
period
Payable Net Operating Cycle
Deferral
period
Gross Operating
cycle

9. WORKING CAPITAL
BASIS OF BASIS OF
CONCEPT TIME
Gross Net Permanent Temporary
Working Working / Fixed / Variable
Capital Capital WC WC
Seasonal Special
WC WC
Regular Reserve
WC WC

10. Total
Assets Short-term
Debt
Fluctuating Current
Assets
Amount of
WC Rs
Long-term
Debt +
Permanent Current Assets
Equity
Capital
Fixed Assets
Time

11. (Un)Balanced Working Capital

12. Bal Balanced Working Capital

13. Bal Balanced Working Capital

14. Nature of
Business
Availability of Credit
from suppliers

15. Dimension I
Profitability,
Risk, & Liquidity

16. Long-term Financing Matching Approach
Short-term Financing Conservative Approach
Spontaneous Financing Aggressive Approach

19. Cost
Flexibility
Risk