1. Working Capital: Conceptual Framework
1.1 Introduction
1.2 Meaning of Working Capital
1.3 Classification of Working Capital
1.3.1 On the Basis of Concept
1.3.2 On the Basis of Time
1.4 Characteristics of Working Capital
1.5 Principles of Working Capital Management
1.5.1 Principle of Risk Variation
1.5.2 Principle of Cost of Capital
1.5.3 Principle of Equity Position
1.5.4 Principle of Maturity of Payment
1.6 Objectives of Working Capital Management
1.7 Components of Working Capital
1.7.1 Current Assets
1.7.2 Current Liabilities
1.8 Factors Determining Need for Working Capital
1.8.1 Nature of Business
1.8.2 Size of Business
1.8.3 Production Cycle Process
1.8.4 Production Policy
1.8.5 Terms of Purchase and Sales
1.8.6 Seasonal Variation
1.8.7 Growth and Expansion
1.8.8 Level of Taxes
1.9.9 Dividend Policy
1.8.10 Other Factors
1.9 Importance of Working Capital Management
1.9.1 Raises Goodwill
1.9.2 Maintains Liquidity
1.9.3 Offers Security
1.9.4 Benefit of Economical Purchase
1.9.5 Increasing Production Efficiency
1.9.6 Easily Borrowing of Funds
1.10 Sources of Working Capital
1.10.1 Permanent or Fixed Sources
1.10.2 Temporary or Variable Sources
1.11 Steps in the Determination of Working Capital
1.12 Working Capital Management: Profitability and Risk
1.13 Financing Current Assets: Different Approaches
1.13.1 Matching Approach
1.13.2 Conservative Approach
1.13.3 Aggressive Approach
1.14 Adequacy of Working Capital
1.14.1 Advantages of Adequate Working Capital
1.14.2 Disadvantages of Inadequate Working Capital
1.14.3 Disadvantages of Excessive Working Capital
2. Inventory Management
2.1 Introduction
2.2 Concept of Inventory
2.2.1 Meaning
2.2.2 Definition
2.3 Concept of Inventory Management
2.3.1 Meaning
2.4 Objectives of Inventory Management
2.5 Type of Inventory
2.6 Motive for Holding Inventory
2.7 Inventory Management
2.8 Inventory Control Techniques
2.8.1 ABC Analysis
2.8.2 Bin Card (Stock Card)
2.8.3 Economic Order Quantity (EOQ)
2.8.4 Stock Levels
3. Management of Receivables
3.1 Introduction
3.2 Meaning of Receivables
3.3 Objectives of Maintaining Receivables
3.3.1 Achieving Growth in Sales
3.3.2 Increasing Profits
3.3.3 Meeting Competition
3.4 Costs of Maintaining Receivables
3.4.1 Capital Cost
3.4.2 Collection Cost
3.4.3 Administrative Cost
3.4.4 Default Cost
3.5 Optimum Credit Policy
3.6 Credit Policy Variables
3.6.1 Credit Standards
3.6.2 Credit Terms
3.6.3 Collection Policy
3.7 Determinants of Size of the Receivables
3.7.1 Volume of Credit Sales
3.7.2 Credit Policies
3.7.3 Period of Credit
3.7.4 Cash Discount
3.8 Benefits of Receivables
3.8.1 Growth in Sales
3.8.2 Increase in Profits
3.8.3 Capability to Face Competition
3.9 Factors Affecting Investment in Receivables
3.9.1 General Factors
3.9.2 Specific Factors
3.10 Formulation of Credit Policy
3.10.1 Lenient Credit Policy
3.10.2 Stringent Credit Policy
3.11 Components of Credit Policy
3.11.1 Credit Term
3.11.2 Credit Standard
3.11.3 Collection Policy
3.12 Credit Evaluation
3.12.1 Collection of Information
3.12.2 Credit Analysis
3.12.3 Credit Decision or Credit Limit
3.13 Credit Control
3.13.1 Formulation of Collection Procedure
3.13.2 Monitoring and Controlling Receivables
4. Management of Cash
4.1 Introduction
4.2 Meaning of Cash
4.2.1 What is Cash
4.3 Nature or Characteristics of Cash
4.3.1 Cash is an unproductive Asset
4.3.2 Minimum Cash Balance
4.3.3 Shortage of Cash
4.4 Objective of Cash Management
4.4.1 Meaning of Cash Outflows
4.4.2 Minimizing the Cash Balance
4.4.3 Effective Control of Cash
4.5 Significance of Cash Management
4.5.1 Bank Relations
4.5.2 Shield of Technical Inefficiency
4.5.3 Maintenance of Goodwill
4.5.4 Availing Cash Discount
4.5.5 Exploitation of Business Opportunities
4.5.6 Facing Unexpected Events
4.6 Motives for Holding Cash
4.6.1 Transaction Motive
4.6.2 Precautionary Motive
4.6.3 Speculative Motive
4.7 Determining Optimal Level of Cash
4.7.1 Factor Affecting Level of Cash
4.7.2 Optimal Level of Cash
4.7.3 Sources of Cash
4.8 Effective Control of Cash
4.9 Control of Cash
4.10 Cash Flow Analysis (AS-3)
4.10.1 Introduction
4.10.2 Scope
4.10.3 Certain Terms
4.10.4 Purpose of the Statement of Cash Flow
4.10.5 Classification of Cash Flow
4.10.6 Interest and Dividends
4.10.7 Taxes on Income
4.10.8 Data Required
4.10.9 Disclosure Requirements
4.11 Models of Cash Management
4.11.1 Baumol’s Model
4.11.2 Miller-Orr Model
4.12 Cash Conversion Cycle
4.12.1 Types of Float
4.13 What is Cash Budget?
4.13.1 Cash Budget and Working Capital Budget
4.13.2 Importance of Cash Budget
4.13.3 Methods of Preparing Cash Budget
5. Techniques of Leverage Analysis
5.1 Introduction
5.2 Concept of Leverage
5.2.1 Operating Leverage
5.2.2 Financial Leverage
5.2.3 Combined Leverage
6. Various Sources of Finance
6.1 Need for Finance
6.2 Internal Sources of Finance
6.2.1 Personal Savings
6.2.2 Retained Profits
6.2.3 Working Capital
6.2.4 Sale of Fixed Assets
6.3 External Sources of Finance
6.3.1 Ownership Capital
6.3.2 Non-ownership Capital
6.4 Sources of Long-term Finance
6.4.1 Introduction
6.4.2 Meaning and Purpose
6.4.3 Factors Determining Long-term Financial Requirements
6.4.4 Sources of Long-term Finance
6.5 Sources of Short-term Finance
6.5.1 Introduction
6.5.2 Purpose of Short-term Finance
6.5.3 Sources of Short-term Finance
6.5.4 Merits and Demerits of Short-term Finance
6.6 Venture Capital
6.6.1 Features of Venture Capital
7. Calculation of Cost of Capital
7.1 Introduction
7.2 Significance of the Cost of Capital
7.3 Computation of the Cost of Capital
7.4 Weighted Average Cost of Capital
7.5 Marginal Cost of Capital
8. Finance Institutions for Medium and Long-term Finance
8.1 Establishment of Financial Institutions
8.2 All-India Financial Institutions (AIFIs)
8.2.1 All-India Development Banks
8.2.2 Specialised Financial Institutions
8.2.3 Investment Institutions
8.3 State Level Institutions
8.3.1 State Financial Corporations (SFCs)
8.3.2 State Industrial Development Corporations (SIDCs)
8.4 Regulation and Supervision of Financial Institutions
8.5 Finance Institutions: An Assessment
9. Credit Policy Reforms in India
9.1 Allocation of Credit
9.1.1 Allocation of Credit between Government and the Private Sector
9.1.2 Inter-sectoral Allocation of Institutional Credit
9.1.3 Inter-regional Allocation of Credit
9.2 Credit Market Reforms
9.2.1 Measures to Reduce Non-performing Assets (NPAs)
9.2.2 Development of Securitisation Market
9.2.3 Roadmap for Foreign Banks
9.2.4 Complex Financial Products
9.2.5 Credit Derivatives
9.2.6 Credit Information Services
Bibliography
Index
