A book review on Principles and Applications of WORKING CAPITAL MANAGEMENT

By ABHIJEET KALANTRI R31012

 Authors Gaurav Agrawal

. Tulika Agrawal Contents- 13 chapters on Working Capital Book published for Industrialists, Project managers, Teachers and Students Gives systematic application of the technique, tools and practices of Management of working capital

1. Working capital management - Nature and scope

Working capital needed for the

requirements of working or day-to-day expenses of the business. Working capital = Current assets current liabilities Difference between working capital and fixed capital

2.Assessment and computation of of working capital management

Analysis of working capital shows the

working capital is utilizing properly in business or not Methods (i) Ratio analysis (ii) Fund flow statement (iii) Cash flow statement (iv) Working capital budget or cash budget

3.Profitability Liquidity trade-off

Liquidity refers to the ability of business

entity to meet short-term maturing obligations (i.e. current liabilities) Measurement of liquidity is done through liquidity ratios calculated on the basis of balance sheet data and on basis of net working capital and net liquid balance

4.Working capital policies, principles and management

It includes principles of

(i) Risk variation (ii) Cost of capital (iii) Equity position (iv) Maturity of payment

5.Management of cash
Objectives of cash management:

(i) Meeting payment schedules

(ii) Minimizing funds locked up as cash

balances Methods of improving cash collections: (i) Prompt payment by customers (ii) Establishment of collections centers

6.Cash budget
Cash budget is statement showing the

estimated cash inflows and cash outflows over the planning horizon or net cash position of a firm as it moves from one budgeting sub period to another is highlighted by the cash budget.

7. Fund flow statement 8.Cash flow analysis

Cash flow statement and fund flow

statement are statements which show current financial position of company. It consists of three activities i.e. (i) Operating activities (ii) Investing activities (iii) Financing activities

9.Marketable securities
Marketable securities are short term

highly liquid investments in money market instruments that can easily be converted into cash. As cash management and marketable securities are closely related, cash management should take care of the investment in marketable securities.

10. Management of receivables

Receivables represent amounts owed to

the firm as a result of sale of goods or services in the ordinary course of business. These are claims of the firm against its customers and firm part of its current assets. The purpose of maintaining or investing in receivables is to meet competition, and to increase the sales and profits.

11. Inventory management

Appropriate part of capital of any

business organization is invested in the inventory or stock. Hence Inventory has important place in the current assets of any business organization. Inventory management includes efficient conversion of inventory to cash and cash to inventory for efficient flow of cash.

12.Working capital financing

Finance is defined as the provision of

money at the time when it is required. Every enterprise whether big, medium or small, needs finance to carry out its dayto-day operations. Various sources of raising funds include issue of shares, debentures, commercial banks, trade credit, etc.

13. Working capital financing in India

To make credit facilities available equally

and judiciously to all the sectors of the Indian economy, a number of committees has been set up. In this regard five reports submitted by five important committees.

Pros and Cons of Book

This book has elucidated the subject in a

systematic, scientific and analytical way. Examples and questions are arranged in systematic and scientific way in every chapter. But, book relates to only one topic of financial accounting i.e. Working capital. Hence this book is not sufficient for a project manager to improve his skills in Financial accounting as a whole but only specialised in Working capital management.

Thank You!!