WORKING CAPITAL MANAGEMENT
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What is working capital?
Working capital is the difference between current assets and current liabilities. It represents the short-term liquidity available to a firm for its day-to-day operations.
What is the Creditors Turnover Ratio used for in working capital analysis?
It measures how quickly a firm pays its suppliers.
What is the formula for Net Working Capital?
Net Working Capital = Current Assets – Current Liabilities. A positive NWC indicates the firm can meet its short-term obligations from its short-term assets.
What is the Net Working Capital Cycle?
Time taken to convert net current assets into cash.
What are the main components of current assets in working capital management?
Current assets include cash and bank balances, short-term investments, sundry debtors, bills receivable, inventory (stock), and prepaid expenses.
What is Tandon Committee's First Method of lending for working capital?
Bank finances 75% of total current assets minus current liabilities.
What is the Operating Cycle concept in working capital?
The Operating Cycle (also called the Cash Conversion Cycle) is the time taken from purchasing raw materials to collecting cash from debtors. A shorter cycle implies lower working capital requirement.
What is Tandon Committee's Second Method of lending?
Bank finances 75% of current assets minus all current liabilities.
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