Working Capital :Definitions,Concept,Objectives,

Definitions of working capital:There are two schools of thought to define working capital one group of thinkers thought in the broad sense,the term 'working capital' is used to denote the 'total current assets'.The following are some definitions of the group.

1.    According to Mead Baker Malott, "Working capital means current assets."
2.    According to J.S.Mill, "The sum of the current assets is the working capital  of business."

Concept of working capital: Like the broader concept of capital, there is no universally accepted definitions of working capital.As Gilbert Harold puts this problem, "Unfortunately there is so much disagreement among financiers,accountants,businessmen and economists as to the exact meaning of the term 'working capital'.They prefer to all it is 'Circulating Capital' so we shall have to go through the various concepts of working capital before reaching at any conclusion.

There are 2 concepts of working capital. 1.Gross working capital.  2.Net working capital.

1. Gross Working Capital:In fact,working capital means Gross Working Capital.It means the firm's investment in current assets.Current assets are the assets which be converted into cash within an accounting period or one year(normally)
2.  Net Working Capital: Net working capital means the differences between current assets and current liabilities.Current liabilities means the liabilities which the firm has to pay within the one year(or actg period).

Working Capital Objective:The working capital objectives management is to make sure that a firm can keep operating and to ensure that it has enough money to take care of short-term debt and upcoming expenses.This means that the company must maintain the right ratio of assets,liabilities and working capital.
The working capital objectives management could be stated as:

1.   To ensure optimum investment in current assets.
2.   To strike a balance between the twin objective of liquidity and profitability in the use of funds.
3.   To ensure adequate flow of funds for current operation.
4.   To speed up the flow of funds or to minimise the stagnation of funds.