Working Capital Mgt

Working Capital Management A perspective

Some basics ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],BUSINESS Short-term Assets Long-term Assets Long-term Funds Short -term Assets

Working Capital ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],Working Capital

[object Object],[object Object],Definition of Working Capital

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Concept of working capital …1

Concept of working capital …2 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

TYPES OF WORKING CAPITAL WORKING CAPITAL BASIS OF CONCEPT BASIS OF TIME Gross Working Capital Net Working Capital Permanent / Fixed WC Temporary / Variable WC

Operating cycle of a typical company ,[object Object],[object Object],[object Object],Payable Deferral period Inventory conversion period Cash conversion cycle Operating cycle Pay for Resources purchases Receive Cash Purchase resources Sell Product On credit Receivable Conversion period

THE WORKING CAPITAL CYCLE (OPERATING CYCLE) Accounts Payable Cash Raw Materials W I P Finished Goods Accounts Receivable SALES

Matching approach to asset financing Fixed Assets Permanent Current Assets Total Assets Fluctuating Current Assets Time Rs Short-term Debt Long-term Debt + Equity Capital

[object Object],[object Object],MANAGEMENT OF WORKING CAPITAL

Nature of Working Capital Management Dimension I Profitability, Risk, & Liquidity Dimension II Composition & Level of CA Dimension III Composition & Level of CL

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Estimation of working capital requirements

[object Object],[object Object],[object Object],Management of cash

[object Object],Calculating Cash Flows

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],MANAGING CASH FLOWS

Sources of Working Capital ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Bank criteria for typical WC lending ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Usual Qualitative Assessment by Banks Borrower/ Promoter Experience in Industry; commitment to timely order execution; consistency in quality Factor Parameter Scale Large scale servicing capability for different clients; location of base in areas of good quality labour, rentals & power Capabilities Wide range of services; USP in the services offered; value added/ premium services Partners Key management must be technically qualified; relevant domain knowledge pool; reputation of promoters Company Profile Long term buyers; clients well distributed

Working Capital Mgt

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Working Capital Mgt