Bikash Kumar Malviya


This working capital paper is a conceptual analysis of working capital and its impact on profitability of an organization. Working capital is the most crucial asset. Working capital management is a very important component of corporate finance because it directly affects the liquidity and profitability of the company. It deals with current assets and current liabilities.

There are two concepts of working capital:

(i) Gross Working Capital, and
(ii) Net Working Capital.

In the broad sense, the term working capital refers to the gross working capital and represents the amount of funds invested in current assets. In a narrow sense, the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities, or say:

Net working Capital = Current Assets – Current Liabilities

Working capital is the life blood and nerve centre of a business. Just as circulation of blood is essential in the human body for maintain in life, working capital is very essential to maintain the smooth running of business. No business can run successfully without an adequate amount of working capital. The optimal of working capital management is could be achieve by firm that manage the tradeoff between profitability and liquidity.

Objectives of study and Research methodology helped in proving the research. Despite the constraints and limitations of the study, the Conclusions can help to overcome these problems and highlights the best possible use of various components of W. C. This is possible if latest techniques of management and cost accounting are used to manage these components.


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