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: One of the most important working capital components to be managed by all organizations is cash and cash equivalents. Cash management helps in determining the optimal size of the firm’s liquid asset balance. It indicates the appropriate types and amounts of short-term investments along with efficient ways of controlling collection and payout of cash. Good cash management implies the co-relation between maintaining adequate liquidity with minimum cash in bank. All companies strongly emphasize cash management as it is the key to maintain the firm’s credit rating, minimize interest cost and avoid insolvency. B) Management of inventories: Inventories include raw material, WIP (work in progress) and finished goods. Where excessive stocks can place a heavy burden on the cash resources of a business, insufficient stocks can result in reduced sales, delays for customers etc. Inventory management involves the control of assets that are produced to be sold in the normal course of business. For better stock/inventory control: