Page 43 - DCOM505_WORKING_CAPITAL_MANAGEMENT

Working Capital Management Dilfraz Singh, Lovely Professional University

Notes Unit 3: Financing of Working Capital Needs

CONTENTS
Objectives
Introduction

3.1 Sources of Working Capital
3.1.1 Commercial Banks
3.1.2 Commercial Papers (CPs)

3.1.3 Factoring
3.1.4 Trade Credit
3.1.5 Accrued Expenses
3.1.6 Deferred Income
3.2 Summary

3.3 Keywords
3.4 Review Questions
3.5 Further Readings

Objectives

After studying this unit, you will be able to:
Identify the sources of working capital
Discuss the commercial banks and commercial papers

Explain the factoring and trade credit
Describe the accrued expenses and deferred income

Introduction

Once, estimation of working capital required is completed, then the next step is financing of
working capital. Statement of working capital gives clear picture about the components,
(raw materials, work-in-process, finished goods and receivables) and required investment in
these components of working capital. Generally investment in these components varies a great
deal during the course of the year. Financing of current assets is the responsibility of finance
manager who may require spending lot of time for raising finance.

3.1 Sources of Working Capital

Working capital should be financed by suitable and optimal mix of short-term source of funds
and long-term source of funds.

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