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The Significance of Working Capital Management

Working capital management is significant in financial management due to the fact that it plays a vital role in keeping the wheel of the business running. Every business requires capital, without which it cannot be promoted. Investment decision is concerned with investment in current asset and fixed asset. There are two assets required to be financed by fixed capital and working capital. In other words, the required capital can be divided into two categories, such as fixed capital and working capital. Fixed capital required for establishment of a business, where as working capital required to utilize fixed asset. Fixed asset cannot be utilized without current asset. It is just like blood in the human body, without which there is no body. Working capital plays a key role in a business enterprise just as the role of heart of heart in human body. It acts as grease to run the wheels of fixed asset. Its effective provision can ensure the success of a business while its inefficient management can lead not only to loss but also unlimited downfall of what otherwise might be considered as a promising concern. In other words, efficiency of a concern depends largely on its ability to manage its working capital. Working capital management is there for one of the important facet of a firm’s over all financial management. Meaning Working capital refers to short term fund to meat operating expenses. To quote great Indian financial analyst and scholar Mr. Ramamoorthy, “it refers to the funds, which a company must possess to finance its day to day operations”. It is concerned with the management of the firm’s current asset and current liabilities. It relates to with the problems that arise in attempting to manage current assets, current liabilities and their inter relationship that exist between them. If a firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. Concepts of working capital The concept of working capital has been a matter of great controversy, among the financial wizards and they view it differently. There is no universally accepted definition of working capital. Broadly there are to concepts of working capital commonly found in the existing literature of finance such as: Gross Working Capital Net Working Capital Gross Working Capital concept According to this concept, the total current assets are termed as the gross working capital or circulating capital. Total current asset include; cash, marketable securities, account receivables, inventory, prepaid expenses, advanced payment of tax. This concept also called as quantitative or broad approach. To quote Weston and Brigham, ” Gross Working Capital refers to firm’s investment in short term assets such as, cash, short term securities, account receivables and inventories “. The concept helps in making optimum investment in current assets and in their financing. According to Walker, “use of this concept is helpful in providing for the current amount of working capital at the right time so that the firm is able to realize the greatest return on investment”. Significance Gross working capital concept focuses attention on the two aspect of current asset management. They are: 1). Optimum investment in current assets: Investment in current asset must be just adequate to the needs of the firm. On the other hand excessive investment in current asset should be avoided. 2). Financing of current asset: Need for working capital arise due to the increasing level of business activity. Therefore, there is a need to provide it quickly. If there is surplus fund arise that should be invested in short term securities. Net Working Capital Concept As per this concept the excess of current asst over current liabilities represents net working capital. Similar view is expressed by Guthmann, Gerstenberg, Goel Etc. Net Working Capital represents the amount of current asset which remain after all the current liabilities were paid. It may be either positive or negative. It will be positive if current asset exceed current liabilities and vice versa. To quote Roy Chowdry, “Net Working Capital indicates the liquidity of the liquidity of business whilst gross working capital denotes the quantum of working capital with which business has to operate. Significance Net Working Capital Concept focuses on two aspects. They are: 1). Maintaining liquidity position: Excess current assets help in meeting its financial obligation within the operating cycle of the firm. Negative and excess working capitals both are bad to the firm. 2). To decide upon the extent of long term capital in financing current asset: Net working capital means the portion of current asst that should be financed by long term funds. This concept helps to decide the extent of long term fund required in finance current assets. Kinds of working capital The categorization of working capital can be made either based on its concept or the need to maintain current asset either permanently and or temporarily. As per conceptual view it may be classified in to gross and net work in capital. Gestenberg has conveniently classified the working capital in to regular or permanent working capital and temporary or variable working capital. Gross working capital or quantitative Net working capital or qualitative Temporary or variable working capital Permanent or regular working capital Types of working capital Concept base Time base Permanent working capital This is the minimum investment kept in the form of inventory of raw materials, work in process, finished goods, stores and spares and book debt to facilitate uninterrupted operation in a firm. Though this investment is stable in short run, it certainly varies in long run depending upon the expansion programs undertaken by the firm. It may increase or decrease over a period of time. Temporary working capital Any additional working capital apart from permanent working capital required to support the changing production and sales activities is referred to as temporary working capital. A firm required to maintain an additional amount current asset temporarily over and above permanent working capital. Temporary Permanent Components of working capital 1). Current Asset Current are those assets that in the ordinary course of business can be or will be turned into cash within an accounting period. It includes cash, marketable securities, inventories, sundry debtors, banks and prepaid expenses. 2). Current Liabilities Current liabilities are those liabilities intent to be paid in the ordinary course of business within a reasonable period. It consist of sundry creditors, loans and advances, bank over draft, short term borrowing, taxes and proposed dividend. Aspects of Working Capital Management Management of working capital involves the following four aspects: Determining the total fund requires to meet the current operations of the firm. To decide the structure of current assets. To evolve suitable policies, procedures and reporting system for controlling the individual components of current assets. To determine the various sources of working capital. Objectives of Working Capital Management To ensure optimum investment in current assets. To strike a balance between the twin objectives of liquidity and profitability in the use of funds. To ensure adequate flow of funds for current operations. To speed up the flow of funds or to minimize the stagnation of funds. Operating cycle The operating cycle involves the following procedure: conversion of cash in to raw materials conversion of raw materials in to work in progress conversion of work in progress in to finished goods conversion of finished goods in to sales conversion of debtors in to cash Finished goods Work in process Raw materials cash Sales Debtor Factors influencing working capital Nature of business Size of business Production cycle process Production policy Credit policy or terms of purchase and sales Business cycle Growth and expansion Scarce availability of raw materials Profit level Level of taxes Dividend policy Depreciation policy Price level changes Operating efficiency Availability of credit Need to maintain balanced working capital For maximization profit or minimization of working capital cost or to maintain balance between liquidity and profitability, there is a need to maintain a balance in working capital. It should not be excessive or inadequate. Excessive working capital means idle funds that can earn no profit but involve cost, and inadequate working capital disturbs production and profitability. Danger of excessive working capital It results in unnecessary accumulation of inventories. It is indication of defective trade policies and slack in collection period. It makes management complacent which degenerates in to managerial inefficiency. Accumulation inventories tend to make speculative profits grow. Danger of inadequate working capital It stagnate growth. It becomes difficult to implement operating plans and achieve the firm’s target. Operating inefficiencies creep in. It leads to inefficient utilization of fixed assets. Firm loses its reputation.

Methods and Tools Decision Making

Methods and Tools Decision Making. I’m studying for my Management class and need an explanation.

Length: 3 to 4 pages APA style: citations and references
Now that you have formed a decision-making team, the executive has asked the team to create a decision tree for the implementation of ERP software. Research two brands of ERP software that Smitheford could use to improve its performance. In the decision tree, analyze the possible effects that the implementation of each brand of ERP software may have on Smitheford’s operations. In a single word document, address the following:
1. Provide an overview of two brands of ERP software to the executive.
2. Create a decision tree diagram that includes both brands of ERP software, analyzes key implementation questions, and describes the action outcomes for the executive.3. Using the decision tree diagram that you created, choose one brand of ERP software to recommend to the executive and describe why it should be implemented.
Methods and Tools Decision Making

Physics homework help

online dissertation writing Physics homework help. This is a paper that is focusing on how Te Whāriki and Tātaiako implement Māori cultural knowledge. The paper also provides additional information to use in writing the assignment paper.,How Te Whāriki and Tātaiako implement Māori cultural knowledge,Essay, Early childhood teachers in Aotearoa New Zealand are guided by Te Whāriki and Tātaiako to respectfully implement Māori cultural knowledge, values and practices throughout the day to day teaching and learning experiences within their early childhood centres.  For some teachers this is a new journey and for others, a continuing one.,Introduce your essay by reflecting on your learning journey and articulating your knowledge of Te Tiriti o Waitangi and Māori cultural knowledge, values and practices. Consider why a commitment to these areas is important and what you can do in order to grow and develop your learning journey further.,Then select two practices encompassing Māori cultural knowledge and values that can be effectively implemented into an early childhood centre.,Explain how they honour Te Tiriti o Waitangi,Examine their importance and contribution to children’s learning and early childhood education,Explain how they can be authentically implemented; and,Identify what teaching strategies and professional/personal goals can support the ongoing development of these practices,Explore practical ways to support key aspects of kaupapa Māori, tikanga Māori, and te reo Māori in early childhood contexts,Critically examine historical and contemporary perspectives in relation to Te Tiriti o Waitangi and The Treaty of Waitangi,Critically analyse and apply strategies for ongoing ,bicultural development, and Tiriti-based early childhood education,Remember, ensure  that the paper is at least three pages exclusive of the cover and the reference pages. Also, ensure that you include all the references you use in finding research for this assignment paper. References should be at least three for the paper. All references, citation, and writing should follow the APA formatting and styling guidelines. Finally, ensure you focus on the assignment topic in detail.,Attachments,Click Here To Download,Physics homework help

Compare motivations for establishing the colonies, history homework help

Compare motivations for establishing the colonies, history homework help.

Compare the various motivations for establishing the colonies. How well did the colonies achieve their original purpose or have to adapt to unexpected situations in the New World? Give specific examples from a few of the different colonies.For example, what motivated colonists to settle in Jamestown, Plymouth, Rhode Island or Philadelphia?How did the colonies interact differently with the American Indians?What impact did settlement patterns have on colonial growth and cohesion?Do you see any connection between the settlement patterns and later when the colonies rebelled against Britain?This is a discussion question so does not need to be formatted as an APA paper. Please do site sources in APA also should only be about 2 paragraphs. nothing crazy or difficult
Compare motivations for establishing the colonies, history homework help

John Tyler Community College Salem Witch Trials Annotated Bibliography

John Tyler Community College Salem Witch Trials Annotated Bibliography.

The topic choice is The Salem Witch Trails. There is a research paper that goes with this and they both aren’t due until Nov 29th at 11:59pm. To prepare for your Research paper, you will submit an annotated bibliography that contains at least four (4) secondary sources. These sources should come from the JTCC library databases (Links to an external site.), OR another CREDIBLE source (use your best judgment for evaluating source material). For each source, you will provide a paragraph length annotation. Make sure your selected sources will aid in your research and provide substance for your long research paper. SourcesYou must provide at least four (4) sourcesEach source should be a critical argument on the topic you’ve selected for your research paperSources that only provide biographical information, generalizations, or plot summary are unacceptable; the source MUST provide an argument and make a pointAnnotationsThe annotation for each source should be a paragraph in length, at least 150-200 words.You must include a brief summary of the source. This summary should include the author’s thesis (as a paraphrase) and be no more than about 50 wordsYou must provide an analysis of how you may use the source in your paperFor more information on how to write an annotated bibliography (Links to an external site.), you should view the Purdue OWL’s websiteMLA StyleYour bibliography should be formatted according to MLA formatFor each source, you must provide an MLA citation (Links to an external site.)the annotated bibliography should be formatted as citation first, followed by annotationMechanics, Grammar, and PunctuationAll written assignments should be mechanically and grammatically correct with proper punctuationFor more information on each of these, you should view the Purdue OWL’s General Writing Resources (Links to an external site.) pageHere is something to helpAnnotated Bibliographies How to Write an AnnotationWhy write an annotated bibliography?You can discover what your source contains (analysis).You can discover how best to use that information in your paper (organization).You can discover how to restate your topic into a “working” thesis (purpose).The first 3 questions:What is the main, or most significant idea of this source?What is the author trying to do (purpose)?Who do you think is the author’s intended audience?Combine the Answers:Example: Smith focuses on dropping illiteracy levels among school children, categorizing socioeconomic levels, racial groups, and parents’ educational background. Aiming at a general audience, Smith attempts to convince his readers that most children do poorly in school because their parents don’t work with them in home study sessions.The next two questions:What parts of the subject does the source emphasize or de-emphasize?What assumptions does the author make about the topic or audience?Again, you combine the answers:Example: The author emphasizes that parents need to be more involved in their children’s education and assumes that these parents have the time, expertise, and the inclination to do so.The final three questions:Is there any bias or slant in the source?Are there obvious omissions that seem important to the ideas being discussed?Does the evidence clearly support the author’s main points?The last sentences:Example: While Smith’s data supports his position, his solutions seem too simplistic and very general. Because he ignores the busy schedules, as well as the attitudes and expectations of some parents, his “just do it” advice doesn’t seem likely to change the situation.Extra Tips:Combine answers where possibleWrite 5-8 sentences that describe the information and ideas from each source Use an MLA type Works Cited page with a paragraph of analysis for each sourceUse alphabetical orderDouble-space everythingUse a hanging indent for citationsSome useful verbs (Links to an external site.) to include in your annotations include asks, interrogates, queries, argues, juxtaposes, invokes, claims, studies, surveys, deals with, traces, employs, adheres to (an approach), emphasizes, compares, outlines.
John Tyler Community College Salem Witch Trials Annotated Bibliography