Working Capital

Management

28-04-2010
Dr. Mercia Selva Malar
 Fill in the blanks:
1. ------------ refer to those assets which in the ordinary course of
business can be, or will be, converted into cash within one
year without undergoing any diminution in value and without
disrupting the ---------- of the firm.
2. The goal of working capital management is to manage the
firm’s --------------- and ------------ in such a way that a
satisfactory level of working capital is maintained.
3. The interaction between current assets and current liabilities
is, therefore, the main theme of the ------------------------
4. The two concepts of working capital are: ----------- and
-------------------
5. Gross Working capital means --------------
Fill in the blanks:

1. Net working capital means --------------

2. The measure of liquidity of the firm is
---------------
3. Financing mix means --------------
4. Hedging approach to financing mix is also
called ----------
5. Hedging approach determines the right
financing mix reducing risk by -------------
 Fill in the blanks:
1. Conservative approach suggests that estimated
requirement must be met from ---------------
2. --------------- implies the continuing flow from cash
to suppliers, to inventory, to accounts receivables
and back into cash.
3. The other name for operating cycle is ---------------
4. ---------------- is a certain minimum level of working
capital on a continuous and uninterrupted basis.
5. ---------- is the working capital needed to meet
seasonal as well as unforeseen requirements.
 Fill in the blanks:
1. Changes in the level of working capital occur due to
changes in ------------, -------- and -------------------
2. ------------------ is the relationship between current
assets and sales volume.
3. Some of the determinants of working capital are:
---------------, ---------------, -------------, -----------,
--------------, -----------, ---------------, ------------,
-----------, -------, ---------, -------------, -------------, etc.
4. Computation of Working capital is arrived using the
formula: ------------------
State True or False:

1. Working capital is primarily required due to

non-synchronous nature of the expected
cash inflows and required cash outflows.
2. The entire sum of net profit earned by a
corporate can per se, be considered a source
of financing working capital
3. The longer the production cycle higher the
requirement for WC or vice versa
4. Efficiency of operation accelerates the pace
of cash cycle but it does not affect its working
capital requirements.
 Answers: Fill in the blanks
 Current assets, operations
 Current assets and current liabilities
 Theory of Working capital management
 Gross and net
 Total current assets
 The difference between Current assets and Current
liabilities
 Net working capital
 Choice of sources of financing current assets
 Matching approach
 Matching maturities of debt with maturities of
financial needs
 long-term sources
 Answers: Fill in the blanks
 Operating cycle
 Cash cycle
 Permanent/ fixed working capital
 Temporary/ fluctuating working capital
 Operating / sales expenses, policy, technology
 Current assets policy
 General nature of business, production cycle, Business cycle,
Production Policy, Credit Policy, Growth and Expansion, Profit
Level, Level of taxes, Dividend Policy, Depreciation policy, Price
level changes, Operating efficiency, etc.
 Net Working Capital + Margin for contingency = Working capital
required
State True or False:
Answers
 True
 False
 True
 False