Page 231 - DMGT207_MANAGEMENT_OF_FINANCES

Management of Finances Rupesh Roshan Singh, Lovely Professional University

Notes Unit 10: Working Capital Management

CONTENTS
Objectives
Introduction

10.1 Meaning and Concept of Working Capital
10.1.1 Factors Affecting Working Capital
10.2 Importance of Adequate Working Capital and Optimum Working Capital

10.3 Managing Working Capital
10.3.1 How much Working Capital is Needed
10.3.2 Forecasting Working Capital Needs
10.4 Working Capital Cycle (Operating Cycle)
10.4.1 Estimate of Future Working Capital based on Current Assets and Current
Liabilities
10.4.2 Working Capital Requirement based on Cash Cost
10.4.3 Effect of Double Shift Working on Working Capital Requirements

10.5 Working Capital Policy
10.5.1 Current Assets in Relation to Sales
10.5.2 Ratio of Short-term Financing to Long-term Financing

10.6 Financing of Working Capital
10.7 Summary
10.8 Keywords
10.9 Review Questions
10.10 Further Readings

Objectives

After studying this unit, you will be able to:
 Recognize the meaning and significance of working capital;

 Explain how to determine working capital requirements;
 Describe the different aspects of financing working capital needs;
 Discuss the issue of banking finance facility for working capital.

Introduction

Procurement of funds is firstly concurred for financing of working capital requirement of the
firm and secondly for financing fixed assets.

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