Working Capital Sources
--Own funds
--Bank borrowings
--Sundry Creditors
--Advances from customers
--Deposits due in a year
--Other current liabilities
Working Capital Assessment Methods
--Operating Cycle Method
--Traditional method
--Projected Balance Sheet method
--Cash Budget method
--Projected Annual Turnover method (Nayak Committee)
OPERATING CYCLE METHOD
Time taken between cash outlay and cash realisation through sale of finished goods & realisation of receivables is known as length of operating cycle. Consists of:
--Time taken to acquire and average storage period of raw material
--Conversion process time
--Average period for which finished goods are in store
--Average collection period of receivables (Sundry Debtors)
Projected Balance Sheet Method
--Proper examination of performance
-----Profitability
-----Financial Position
-----Financial Management
Scrutiny & Validation of Projections
-----Income & Expenses
-----Changes in Financial Position
-----Acceptability of Liquidity, Overall gearing, efficiency of operations
Cash Budget Method
--Applicable to seasonal industry (such as tea, sugar)
--Specific industry (such as Information Technology and software)
--Based on Peak Deficit projected as per cash flow statement
