Working Capital Management Accounting for LDCE

                                                      Working Capital Management Accounting for LDCE

1991 LDCE SCR - 5 marks

 

ü  Meaning:  Represents the amount of funds required to finance " the day to day activities".

 

ü  Excess of Current Assets over Current Liabilities.

 

ü  It should be ideal/sufficient.  That means neither more nor less to the correct requirements of working capital.

 

ü  Shortage - Difficult to manage day to day activities/payments.

 

ü  Surplus - Capital will be blocked / unutilized.

 

ü  So it should be sufficient to meet current obligations  ( not long term obligations)

 

ü  The difference between Gross Working Capital and Net Working Capital is "Current Liabilities". Total sum of all current assets is called Gross Working Capital.  The difference between Current Assets & Current Liabilities is called Net Working capital.

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