WORKING CAPITAL MANAGEMENT

Working capital is defined as the excess of current asset over current liabilities are those asset which can be converted into cash within current accounting period or with in the next year as result of ordinary operation of the business. They are near cash resources. That are-

1.Cash
2.Receipts
3.Bank balance
4.Prepaid expenses
5. Inventories


Current liabilities are the debt of firm that have to be paid during the current accounting period or with in the year.

1.Creditor’s for the goods purchased
2.Out standing expenses
3.Short term borrowings
4.Advance against Sales
5.Other liabilities



OBJECTIVES OF WORKING CAPITAL MANAGEMENT


1.By optimizing investment in current asset & by reducing the level of current liability, the company can reduce the locking up of funds of working capital there by; it can improve the return of capital employed in the business.


2.The second important objective of working capital
Management is that the company should always be in
a position to meet the current obligations which
should properly be supported by current asset
available with the firm. But maintain excess funds in working capital lacking of funds within without return.


3.The firm should manage its current asset is such way that marginal return on investment in these asset is not less than the cost capital.