Working Capital Essay

6350 WordsMar 13, 201426 Pages
orking capitalWORKING CAPITAL MANAGEMENT In this unit you will learn, meaning and concepts of working capital, kinds of working capital, working capital management functions, factors, affecting working capital, estimation of working capital requirement, sources of working capital, Tandem committee recommendations, Chore committee recommendations, Marathe committee recommendations and Vaz committee recommendations on working capital. INTRODUCTION The capital required for a business is of two types. These are fixed capital and working capital. Fixed capital is meant for taking up capital expenditures while working capital is for meeting revenue expenditures. Fixed capital is the capital required for acquiring fixed assets such as land, building, plant, machinery, fixtures, fittings, etc. forking capital refers to the capital (i.e. funds) needed to meet day-to-day operations of the business, like payment for purchase of raw materials, payment of wages and salaries, payment of recurring overhead expenses and so on. Forecasting and managing working capital arc somewhat more difficult than that of fixed capital. This is due to variability and variety in respect of working capital needs of a business. Careful management of working capital is needed, for poor working capital management would lead ti> closure of business. It is said while faulty fixed capital management has lead u closure of units in 10s, faulty working capital management has lead to closure o 100s of units. Hence the significance of working capital management. 3.1 MEANING AND CONCEPTS OF WORKING CAPITAL Let us examine the meaning and concepts of working capital now 3.1.1 Meaning James C. Van Home defines working capital management as the administration of the firm's, current assets and the financing needed to support current assets. As was already referred to working capital is the dayto-day requirement

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