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126 Corporate Finance BRILLIANT’S

financed with the permanent sources of funds H¡${nQ>b `m [aQ>oÝS> A{ZªJ O¡go \§$S> ñWm`r òmoVm| go d{Hª$J
such as owner's capital, debentures, long-term H¡${nQ>c H$m EH$ ^mJ bJm`m OmZm Mm{hE& _¡ZoO_|Q> H$mo `h
debt, preference capital or retained earnings. ^r V` H$aZm hmoVm h¡ {H$ H$aÝQ> AgoQ²>g Ho$ {bE {H$g
Management must decide the extent to which
current assets should be financed with equity gr_m VH$ B{ŠdQ>r H¡${nQ>b Ed§ F$U H$s am{e go \$m`ZoÝg
capital and borrowed capital. H$aZm h¡&
It may be concluded that both gross AV… h_ `h H$h gH$Vo h¢ {H$ d{Hª$J H¡${nQ>c Ho$
working capital and net working capital are à^mdr _¡ZoO_|Q> Ho$ {bE J«m°g Ed§ ZoQ> XmoZm| d{Hª$J H¡${nQ>c
equally important for effective management _hËdnyU© h¢& J«m°g Ed§ ZoQ> d{Hª$J H¡${nQ>c H$s n`m©á am{e
of working capital. The exact amount of gross {ZYm©[aV Zht H$s Om gH$Vr& Bgr àH$ma, BgHo$ {bE ^r
and net working capital can not be determined. H$moB© {deof {Z`_ Zht h¡ {H$ H$aÝQ> AgoQ²>g Ho$ {cE \$m`ZoÝg
Similarly, there is no specific rule as to how
current assets should be financed. There should Ho$ òmoV H$m¡Z go hmoZo Mm{h`oŸ& BgHo$ {bE {d{^Þ g§gmYZm|
be proper balance and prudent-mix of various H$m gmoM g_PH$a g_pÝdV Cn`moJ H$aZm Am¡a CZHo$ ~rM
sources and their applications. C{MV Vmb_ob ~ZmE aIZm Amdí`H$ h¡&
Constituents of Current Assets and Current Liabilities

Current Assets Current Liabilities
 Inventories-Raw Material, work in  Sundry creditors
progress, finished goods,  Bills payable,
 Debtors,  Bank overdraft,
 Cash and bank balance,  Outstanding expenses,
 Prepaid expenses,  Short term borrowings,
 Short term investments,  Tax payable,
 Bills receivable.  Arrears of dividend and other liabilities
payable within a year.
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