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Corporate Finance

Corporate Finance. Prof.Dimple Pandey dimple.pandey@nmims.edu. Working Capital. Money available to the company for day to day operations It plays a vital role in keeping the wheel of the business running. Working Capital- Determinants. Nature of Business Size of Business

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Corporate Finance

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  1. Corporate Finance Prof.Dimple Pandey dimple.pandey@nmims.edu

  2. Working Capital • Money available to the company for day to day operations • It plays a vital role in keeping the wheel of the business running

  3. Working Capital- Determinants • Nature of Business • Size of Business • Production Cycle Process • Credit Policy or Terms of Purchase and Sales • Growth and Expansion • Scarce Availability of Raw Materials • Profit Level • Dividend Policy • Availability of Credit

  4. Concept of working capital • Gross Working Capital- total current assets • Significance • Optimum Investment in Current Assets • Financing of Current Assets • Net Working Capital- the excess of current assets over current liabilities represents net working capital • Significance • Maintaining Liquidity Position • To decide upon the Extent of Long-term Capital in Financing Current Assets

  5. Why it matters? Common measure - Liquidity - Efficiency - Over all Health of the organization

  6. Need of adequate working capital

  7. Working Capital Cycle

  8. Estimation of Working Capital

  9. Calculation of Working Capital • Step 1 : Estimate the cash cost of various current assets required by the firm. • Step 2 : Deduct the spontaneous current liabilities from the cash cost of current assets Working Capital = Total Current Assets – Total Current Liabilities

  10. Financing of working capital needs

  11. End of Chapter

  12. Thank you

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