Working Capital, being lifeblood for any enterprise, its management becomes a crucial exercise for the Financial Manager of a firm. The need of working capital is directly linked to the growth of the firm. Working Capital refers to the funds invested in the current assets of a firm such as raw materials, work-in-progress, finished goods, receivables, cash etc. From the viewpoint of manufacturing process, working capital means that part of capital, which is required to keep the flow of production smooth and continuous.
For day-to-day operations, a business needs to carry certain amount of raw material of all sorts so that commencement of production is not delayed, certain amount of work-in-process so that production operations go smoothly, certain amount of finished goods so that supply to market is not hampered by fluctuations in production, certain amount of book debts so that sales take place continuously and certain amount of cash and bank balance for meeting daily routine payments and for providing for any unforeseen contingencies.… Read the rest