working capital management project report on cooperative banks
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A study on working capital management at cooperative urban society or bank
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Working capital (abbreviated WC) is a financial metric that represents the operational liquidity available to a company, organization or other entity, including a government entity. Along with fixed assets such as plant and equipment, working capital is considered a part of working capital. Gross working capital is equal to current assets. Working capital is calculated as current assets less current liabilities. If current assets are lower than current liabilities, an entity has a working capital deficiency, also called working capital deficits.

A business can be endowed with assets and profitability but short of liquidity if its assets can not easily be converted into cash. Positive working capital is required to ensure that a company can continue its operations and that it has sufficient funds to meet both the short-term debt due and the upcoming operational expenses. The management of working capital consists of the administration of inventories, accounts receivable and payable, and cash.

The working capital ratio, calculated as current assets divided by current liabilities, is considered a key indicator of a company's fundamental financial health, since it indicates the company's ability to successfully meet all its short-term financial obligations. Although the numbers vary by industry, a working capital ratio of less than 1.0 is generally indicative of a company having problems meeting short-term obligations, generally because of insufficient cash flow. Working capital ratios of 1.2 to 2.0 are considered desirable, but a ratio of more than 2.0 may indicate that a company is not making more efficient use of its assets to increase revenues.

The collection ratio, also known as the collection period average quotient, is a major measure of how efficiently a company manages its accounts receivable. The collection ratio is calculated as the number of days in an accounting period, such as a month, multiplied by the average amount of accounts receivable, with that total then divided by the total amount of net credit sales during the accounting period . The calculation of the collection ratio provides the average number of days it takes a company to receive the payment, that is, convert sales into cash. The lower the rate of collection of a company, the more efficient is its cash flow.

The last element of working capital management is inventory management. To operate at maximum efficiency and maintain a high level of working capital, the company must carefully balance enough inventory to meet customer needs, avoiding unnecessary inventories that tie up working capital for a long period of time before becoming cash. Companies typically measure how efficiently this balance is maintained by monitoring the inventory turnover rate. The inventory turnover rate, calculated as revenue divided by the cost of inventory, reveals how quickly a company's inventory is sold and replenished. A relatively low ratio compared to industry pairs indicates that inventory levels are excessively high, while a relatively high proportion indicates that inventory order efficiency can be improved.
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