Reliance Communications : Reliance Communications Managing working capital
Working Capital : Working Capital is the amount of Capital that a Business has available to meet the day-to-day cash requirements of its operations
WC = (CA - CL)
It is required for Financing Short-Term or Current Assets such as Cash, Marketable Securities etc.
Working Capital is also known as Revolving or Circulating Capital or Short-Term Capital Working Capital
Factors affecting Working Capital : Nature of Business/Industry
Size of Business/Scale of Operations
Growth prospects
Business Cycle
Manufacturing Cycle
Operating Cycle
Operating Efficiency Factors affecting Working Capital
Cont : Depreciation Policy
Taxation Policy
Dividend Policy
Government Regulation Cont
Working Capital Management : Working Capital Management is concerned with the problems that arise in attempting to manage the Current Assets, Current Liabilities and the interrelationship that exists between them
Working Capital Management means the deployment of current assets and current liabilities efficiently so as to maximize short-term liquidity Working Capital Management
Cont : Working capital management entails short term decisions - generally, relating to the next one year period - which are "reversible"
Two Steps involved in the Working Capital Management:
Forecasting the Amount of Working Capital
Determining the Sources of Working Capital Cont
Slide 7: Importance:
Working Capital is the Life Blood of the Business
Fixed Assets (Long Term Assets) can be purchased on Lease/Hire Purchase but Current Assets cannot be
Liquidity V/s Profitability
Objectives: : Deciding Optimum Level of Investment in various WC Assets
Decide Optimal Mix of Short Term and Long Term Capital
Decide Appropriate means of Short Term Financing Objectives:
Case Analysis: Reliance : Reliance is one of the leading player in the telecom industry
Huge customer base of 85 billion including 2.2 million overseas retail customer.
It has a pan-India presence covering the entire value chain of telecommunication offering service in more than 24000 towns and 6 lac villages. Case Analysis: Reliance
Cont : The total Assets of the company increased over the years and had a satisfactory liquidity position with a current ratio of 2.73. Cont
Working Capital: Ratios : Current Ratio:
2008= 1.64
2009= 2.73
Cash Ratios:
2008= 0.017
2009= 0.057 Working Capital: Ratios
Slide 12: Quick Ratio:
2008= 1.62
2009= 2.70
NWC Ratio:
2008= 0.23
2009= 0.32