Working Capital

This report discusses the procedure in which a company approaches a bank for working capital. And it discusses about the process the bank follows while assessing working capital requirement of the company. This report contains complete financial analysis of a cement company. It discusses about the working capital requirements of the company. Working capital can be categorized into fund based and non fund based. In case of fund based the working capital requirements can be computed by 2nd method of MPBF (Maximum Permissible Bank Finance). Out of the assessed MPBF, bank decides how much limit it can grant to the company. And in case of non fund based, using lead time, transit period and credit period bank assess the LC limit required by the company for processing raw materials and stores or spares. Working capital refers to the current asset holding of an enterprise. This is also sometimes called the gross working capital. The funds employed in the business can be categorized into two components i.e. fixed capital and working capital. Fixed Capital is utilized for acquiring the fixed assets such as land, building, plant & machinery, etc., and to meet capital expenditure connected with the setting to keep the wheels moving up of the industry or Concern. But by themselves, these fixed assets would not produce or earn anything. They have to be run or worked for production. This requires enough liquid sources, viz., working capital.

Operating Cycle or Working Capital Cycle

Working capital cycle of a manufacturing activity starts with the acquisition of the raw materials / stores & spares and ends with realization of cash for finished goods. The cycle is long in some cases and short in other cases depending upon the nature of business. In manufacturing units, Working capital cycle comprises of purchase of raw materials either in cash or credit basis, converting raw materials into stock in process and then into