A presentation entitled

In the partial fulfillment of post graduate degree

Master in business administration

Presented to: R.T.U Kota

Presented by: kusum lata baghel

MBA 2nd SEM

Roll no. 09MELXX619

Table of contentTable of content

Definition of working capitalDefinition of working capital

Concept of working capitalConcept of working capital

Approaches of working capitalApproaches of working capital

Significance of adequate working capitalSignificance of adequate working capital

Effect of excessive working capitalEffect of excessive working capital

Determinant of working capitalDeterminant of working capital

Estimating working capital requirement Estimating working capital requirement

Definition of working capital

Working capital means that part of the total asset of the business that changes from one form to another form in a ordinary course of business operations.

Working capital= current assts – current liabilities

CONCEPT OF WORKING CAPITAL

BALANCE SHEET CONCEPT OPERATING CYCLE COCEPT

GROSS WORKING CAPITAL

NET WORKING CAPITAL

PERMANENT WORKING CAPITAL

VARIABLE WORKING CPITAL

SEASONAL SPECIFIC

Approaches of working capital

Matching or hedging approach

Conservative approach

Aggressive approach

Matching or hedging approach

Short term financing

Long term financing

Working capital (Rs)

Temporary working capital

time

Conservative approach

………………………................

.

….

Long term sources

Short term sources

Amount of w.c

Amount of w.c

Short term financing

Marketable sec.

Long term financing

Long term sources

TimeTime

Total w.c

Aggressive approach

………………………………………………

……………………………………………….

Permanent w.c

Total w.c

Short term financing

Short term financing

Long term sources

Long term sources

Time

Working capital (Rs)

SIGNIFICANCE OF ADEQUATE WORKING CAPITAL

• Adequate dividend distribution

• increase goodwill and debt capacity

• easy loans from banks

• Increased efficiency

• increase in fixed assets productivity

Effect OF EXESIVE WORKING CAPITAL

• UNNECESSARY STOCK PILLING

• DEFECTIVE CREDIT POLICY

• MANAGERIAL INEFFICIENCY

• EFFECT ON PROFITABILITY

•DISSATISFACTION AMONG SHAREHOLDERS

•PROMPTS SPECULATION

Determinant of working capital

1. Nature of business

2. Size of business

3. Changes in technology

4. Length of operating cycle

5. Seasonal nature of business

6. Firm’s credit policy

7. Terms of purchase and sales

8. Rate of growth of business

Estimating working capital requirement

1. %age of sales method

2. Regression analysis method

3. Operating cycle method

4. Forecasting net current assets method

5. Projected balance sheet method