Working Capital Management - Circulating System

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Working Capital Management - Circulating system : The funds in the business are obtained from the issue of shares, issue of debentures. Other long term arrangement and from operations of business.

A high part of generated funds is used to acquire fixed assets viz. plant and machinery, land and building and some other fixed assets, while the remaining part of the generate funds is used for day to day operations for the business i.e. to pay wages, creditors for raw material purchases and overhead expenses, for the raw material processed.

This makes possible the stocking of finished goods by whose sales either account receivable are created or cash is received. In this process profit are generated. A part of profit is used to pay tax. Interest and dividends while the remaining part is ploughed back in the business. This cycle goes on constantly throughout the life of business.
 
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