Title: Working Capital Management: Components & Approaches
Headings: Working Capital Management
Working Capital Management
What is Working Capital Management?
Formula for Working Capital: “Current Assets – Current Liabilities”
Illustration to calculate working capital:
Components of the balance sheet: (Rs)
Factors effecting working capital:
Working capital Approaches:
Classification of Working Capital:
Working Capital in adequate amount:
Working capital cycle:
Working Capital Management:
Components associated with WCM:
A) Cash and Cash equivalents:
B) Management of inventories:
For better stock/inventory control:
C) Management of receivables:
Effectively managing accounts receivables:
D) Management of accounts payable:
Factors to consider:
Time and money concept in Working Capital:

Content: Although investing in good long-term capital projects receives more emphasis than the day-to-day work associated with managing working capital, companies that do not handle this financial aspect (working capital) well will not attract the capital necessary to fund those highly visible ventures; in other words, you must get through the short run to get to the long run. Components associated with WCM: Often the interrelationships among the working capital components create real challenges for the financial managers. Inventory is purchased from suppliers, sale of which generates accounts receivable and collected in cash from customers to pay off those suppliers. Working capital has to be managed because the firm cannot always control how quickly the customers will buy, and once they have made purchases, exactly when they will pay. That is why; controlling the “cash-to-cash” cycle is paramount. The different components of working capital management of any organization are: • Cash and Cash equivalents
• Inventory
• Debtors / accounts receivables
• Creditors / accounts payable
A) Cash and Cash equivalents: