08-02-2013, 03:19 PM
BIG BAZAAR
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INTRODUCATION ON WORKING CAPITAL
Generally, the term working capital refers to that part of capital which is not tied up in fixed assets but is used to meet the day to day requirements of business. It is invested in current assets like cash, stock, bills receivable, debtors etc.
This type of capital is used to make payments for purchase of raw materials, wages and to meet other expenses till goods are sold and money collected against it. The stock are to be maintain continuously to meet the demand for the product and some money in tied up in the credit sales.
Capital used for these purpose is called working capital.
In other words, working capital is that which is held to meet the day-to-day requirements of business, which changes from day-to-day and which is converted into cash continuously. the risk element is low in it. Working capital is known as current capital, circulating capital and floating capital. Some people called it variable capital also.
Net Working Capital: net working capital represents to the difference between current assets and current liabilities.
The other approach of defining net working capital is “it is that portion of a firms current assets which is finance by long term funds.
Fixed assets are normally financed with long term funds only, whereas a major portion of current assets may be matched financed by current liabilities and to that extent, one may not require working capital. The remaining portion of current assets which is not financed by the current liabilities is called net working capital. it is this amount which is financed by long term funds.
2. Net Working Capital: net working capital represents to the difference between current assets and current liabilities.
The other approach of defining net working capital is “it is that portion of a firms current assets which is finance by long term funds.
Fixed assets are normally financed with long term funds only, whereas a major portion of current assets may be matched financed by current liabilities and to that extent, one may not require working capital. The remaining portion of current assets which is not financed by the current liabilities is called net working capital. it is this amount which is financed by long term funds.
Investment Policy
An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy, e.g. currency exchange limits.
The investment decision relates to the selection of assets in which funds will be invested by a firm. The assets which can be acquired fall into two broad groups:
(1) Long term assets which yield a return over a period of time in future,
(2) Short term or current assets defined as those assets which in the normal course of business are convertible into cash without diminution in value, usually within a year.
The company decided how much amont is invested in the long term assets and how much amount of money invested in the short term assets. Because the fixed assets is giving a company for a long term profitable and the current assets gives a short term return that is liquidity.
Fdi policy in retail sector:-