1Professor Cum Director Periyar Institute of Management Studies (PRIMS), Periyar University, Salem-636 011. Tamilnadu, India
2Ph. D. Scholar (Part Time) Periyar Institute of Management Studies (PRIMS), Priyar University, Salem-636011 Tamilnadu, India
Online published on 8 August, 2018.
In recent years a special emphasis has been laid on an examination of the management performance in regard to financial management and a critical analysis of working capital management has been initiated in developing countries, particularly in India. In financial management, one of the important decisions which is very vital is working capital management and the firms have to always analyse its effect to final impact upon profitability and risk. At the time of increasing capital costs and scare funds, the area of working capital management assumes added importance as it deeply influences a firm's liquidity and profitability. A notable feature of utilization of funds is that they are of recurring in nature. Therefore, efficient working capital management requires a proper balance between generation and utilization of these funds without which either shortage of funds will cause obstruction in the smoother functioning of the organization or excess funds will prevent the firm from conducting its business efficiently. For the efficient use of working capital every firm and every student of business management must acquainted with the basis concepts of working capital, the firms may have optimum level of working capital used in an efficient way to ensure profits. For a student knowledge about the concepts of working capital is essential to improve his entrepreneurship as he is the future-manager or entrepreneur of a firm.
Keeping the importance of the working capital management, the present paper makes a modest attempt to introduce, explain and present the basic concepts of working capital management. This academic exercise is very useful for both owners/entrepreneurs of the firms and the students. This paper analyses the concepts like classification and determinants of working capital, working capital policy, method of estimating the volume of working capital and sources of working capital which facilitates a clear and an easy understanding of the working capital management.
Working Capital, Determinants of working capital, WCM policy, Methods of Estimation, Operating Cycle
