1 .INTRODUCTION

Financial management does performs major aspects viz, necessary procurement at minimum cost of capital and effective and judicious utilization of the fund so procured, in the process of execution of economic activities of a firm. More specially procured fund is utilized for financing working capital and fixed assets. The principal objective of the write up is to portray various issues relating to the process of working capital management of a business entity.

Working capital refers to the investment in current assets such as investment in raw materials, stock of finished goods, etc. Cash, Bank loans and advances are given to the employees in the form of festival, scooter, advances, house building loans, etc. Working capital is used to meet the day-to-day requirements of a business. Current assets are required for effective and efficient use of fixed assets. For the investment in procurement of raw materials, funds are locked up in debtors, cash and banks, prepaid expenditure, etc. is recognized as working capital.

Working capital has two concepts i.e. gross working capital and networking capital.

Gross Working Capital is equal to total current assets only. It is identified with the current assets alone. It is the value of non-fixed assets of an enterprise and includes inventories, receivable, etc.

Net Working Capital is the excess of current assets over current liabilities.

According to the point view of time, working capital is of two types- namely permanent and temporary working capital. Investment in permanent working capital refers to that minimum level of investment in current assets i.e.: carried by the business at all times in order to carry on minimum levels of economic and commercial level of economic and commercial activities. It is also known as hardcore working capital or core current assets. On the other hand, temporary working capital which is required by a business entity over and above the permanent capital. Most of the accountant prefers to call it variable working capital. Both permanent and temporary working capital is necessary for smoothen production and sale throughout the operating cycle.

Working Capital Management is one of the important aspects of financial management. Finance manager is required to keep an eye on business because it should neither over burden nor it suffer from paucity of working capital. Underestimate of working capital may create financial bottlenecks and as consequences, it may loose the market share. Because customers shall proceed to other postures where their requirements can be fulfilled. Pattern of distribution of components of current assets of a corporate in India by and large appears to be: -

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