Prepared By: Muhammed Saheer PV

What is working capital?

Working capital typically means the firms holding

of current or short-term assets such as cash, receivables, inventory and marketable securities. management of CA as well as CL.

Management of Working capital refers to

Working capital financing discusses the source of finance that are used to support current assets It is divided into ten sections:

Accruals Trade credit Working capital advance by commercial banks Regulation of bank finance Public deposits Inter corporate deposit Short term loans from financial institutions Rights debentures for working capital Commercial paper Factoring

Accruals

Major accruals are wages and taxes. These are simply what the amounts that the firm

owes to its employees and is not yet paid is shown as accrued wages.

Accruals vary with the level of activity of the firm.

Trade Credit

It represents the credit extended by the supplier of

goods and services.

The cost of trade credit depends on the terms of

credit offered by the supplier.

Working capital advance by commercial banks

It is the most important source for financing current

assets.

It includes the following aspects of finance:

Application and processing Sanction and terms condition Forms of bank finance Nature of security Margin amount

Regulation of bank finance

Industrial borrowers enjoyed a relatively easy The RBI has been trying to bring a measure of

access to bank finance for meeting their working capital needs. discipline among industrial borrowers and issues guidelines and directives to the banking sector.

Public deposits

Many firms large and small have solicited

unsecured deposits from the public in recent years, mainly to finance their working capital requirements.

Inter corporate deposits

A deposit made by one company with another,

normally for a period up to six months if referred to as an inter corporate deposits.

Short term loans from financial institutions

It is the method of taking loans from short term

financial institutions.

The Life Insurance Corporation of India, the General

Insurance Corporation of India, and the Unit Trust of India provide short term loans to manufacturing companies.

Rights debentures for working capital

Public limited companies can issue rights

debentures for the long term resources of the company for working capital requirements.

Its is provided only on the basis of some guidelines.

Commercial paper

It represents short term unsecured promissory notes

issued by the firms which enjoy a fairly high credit rating. able to issue commercial paper.

Large firms with considerable financial strength are

factoring

A factor is a financial institution which offers

services relating to management and financing of debts arising from credit sales.

THANKS