Working capital management of bank of

Project report on working capital management of cooperative bank

Need of Working Capital Management The need for working capital gross or current assets cannot be over emphasized. As a source for additional understanding of the subject 2. Operating efficiency If the business is carried on more efficiently, it can operate in profits which may reduce the strain on working capital; it may ensure proper utilization of existing resources by eliminating the waste and improved coordination etc. We will hardly finds bank or other firm which does not require any amount of working capital. The banks have to invest enough in current assets for success of their business. Thus some amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash requirements. The larger will be the turnover of the funds invested in various purposes. This portion of the required working capital is needed to meet fluctuation in demand consequent upon changes in production and sales as result of seasonal changes Graph shows that the permanent level is fairly castanet; while temporary working capital is fluctuating in the case of an expanding firm the permanent working capital line may not be horizontal. If the company has certain amount of cash, it will be required for purchasing the raw material may be available on credit basis. This is because efficiency in this area is necessary in order to ensure the bank long-term success and achieve its overall goal which is the maximization of owners wealth. The consideration of the level of investment in current assets should avoid two danger points, the excessive and inadequate investment on assets. Another things that contributed to this limitation are time and financial constraints, which did not allow for more exhaustive research. Nature of business Some businesses are such, due to their very nature, that their requirement of fixed capital is more rather than working capital. The shorter the period of operating cycle.

Working capital is of two types, gross type and net type. Net working capital occurs when current assets exceeds current liabilities.

Working capital management of bank of

This is the precise reason why the needs for working capital arise Types of Working Capital The operating cycle creates the need for current assets working capital.

We will hardly finds bank or other firm which does not require any amount of working capital. Thus the financial managers should have knowledge of the source of working capital funds as well as the investment avenues, where the idle funds may be temporally invested. This is because efficiency in this area is necessary in order to ensure the bank long-term success and achieve its overall goal which is the maximization of owners wealth.

Project report on working capital management in banking sector

The net type is the difference between current assets and current liabilities. Some of them are annual events e. The banks have to invest enough in current assets for success of their business. Profitability The profitability of the business may be vary in each and every individual case, which is in turn its depend on numerous factors, but high profitability will positively reduce the strain on working capital requirement of the company, because the profits to the extent that they earned in cash may be used to meet the working capital requirement of the company. Nature of business Some businesses are such, due to their very nature, that their requirement of fixed capital is more rather than working capital. Size and growth of business In very small company the working capital requirement is quit high due to high overhead, higher buying and selling cost etc. For all practical purpose, this requirement will have to be met permanent as with other fixed assets. It should be noted however, that a bank does not possess full control over its assets and also a greater part of its liabilities, the reality it that it possesses partial control on some current assets and current liabilities absolute control on some and still lack total control over others. In that regards, banks as well as other profit seeking enterprises strive to increase their net income and presence value of their assets. On the other hand, there are some businesses like trading activity, where requirement of fixed capital is less but more money is blocked in inventories and debtors. Length of production cycle In some business like machine tools industry, the time gap between the acquisition of raw material till the end of final production of finished products itself is quite high. Thus some amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash requirements.

The net type is the difference between current assets and current liabilities. Thus some amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash requirements.

thesis of working capital management of commercial bank of nepal

On the other hand, there are some businesses like trading activity, where requirement of fixed capital is less but more money is blocked in inventories and debtors.

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