Working capital management at Britannia Industries Ltd

Finance function is a core function in any organization. I financial management is that managerial activity which is concerned with planning and counseling of firm's financial resources. One such area of financial management is "Working Capital" and management of this is known as "Working Capital Management". In practice, a firm has to employ short-term assets and short run sources of financing. The management of such assets, and short run sources of financing. The management of such assets, described as working capital management or current assets as working capital management is current assets management is one of the most important aspects of overall financial management. Technically the management is an integral part of the overall financial management. To that extent it is similar to the long-term decision making process because both entail an analysis of the effects of the risk and profitability.

The management is concerned with the problems that arise in attempting to manage current assets, the current liabilities and the interrelationship that exist between them. The term current assets refer to those assets, which in ordinary course of business can be, or will be turned into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. CL are those liabilities which are intended at their inception to the paid inn ordinary course of business, within a year, out of CA's or earnings of the owner.

The goal of working capital management is to manage firm's current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. This is so because if the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent.

[...] Working Capital Management To understand Working Capital Management the first requirement is to understand net working capital. The term working Capital” is associated with short-term financial decision-making. It is the difference between current assets and current liabilities. That is why often short- term financial management is called Working Capital Management. Short-term financial decisions typically involve cash inflows and outflows that occur within a year or less. These decisions are usually involved when a firm orders raw materials, pay in cash, and anticipates selling finished goods in one year for cash. [...]

[...] Importance of Working Capital : Management of working capital is an essential task of financial manager. His/ her responsibility is to ensure that the amount of working capital with his/her concern is neither too large nor too small for its near future requirements. A huge amount of working capital would that company has idle funds that result in overcapitalization. Over capitalization implies that a company has too large funds for its requirements including operating requirements and risk management, resulting in a low rate of return. [...]

[...] Working Capital Management CONCEPT OF WORKING CAPITAL There are two concepts of Working Capital: Gross Working Capital It refers to the firm’s investment in total current or circulating assets. Net Working Capital The term Working Capital” has been defined in two different ways: It is the excess of current assets over current liabilities. This is, as a matter of fact, the most commonly accepted definition. Some people define it as only the difference between current assets and current liabilities. The former seems to be a better definition as compared to the latter. [...]