Quantitative Techniques of Working Capital Management

Presented By: Deepika Sachdeva Nishtha Gandhi Vibhor Khandelwal

Working CapitalThe money needed to fund the day to day

operations of your business. It ensures that you have enough funds to pay

your debts and meet expenses as they fall due, particularly the start- up period.

Right Level of working capital: It depends on the industry & particular circumstances.

If your working capital is too: High: your business has surplus which are not

earning a return Low: indicate that your business is facing

financial difficulties

Working Capital Cycle

Cash

Creditors

Inventory

Debtors

Working Capital Management

• Managerial Accounting strategy that focus on maintaining

efficient levels of both components of working capital.

• It ensures that a company has sufficient cash flows to

meet its short term liabilities.

• It is an excellent way for many companies to improve their

earnings.

2 Aspects of W.C.M

Ratio Analysis Management of Individual

Components of WC

Why managing Working Capital???

Short Term Liquidity

Trade Off Between Profitability & Risk

Determining The Financing Mix

Management Of Working Capital

Cash Managemen

t

Inventory Managemen

t

Accounts Receivable

Management

Short Term Financing

Monte Carlo Method

Computational algorithms that rely on random sampling to explain numerical results.

Used to value & analyze instruments, portfolios & investments by simulating the various sources of uncertainty affecting their value & then determining their average value.

Provides flexibility and can handle multiple sources of uncertainties.

Corporate Finance•Valuation of Project•Simulation Of Factors

Stock Options•Change in Price•Estimate future value

Portfolio Evaluation•Determine the wealth to be

gained•Value of the portfolio

Financial Applications