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.