Working Capital Management
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
One-liners from this chapter
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Gross Working Capital?
Total value of the company's current assets — cash, receivables, short-term investments, marketable securities.
Net Working Capital?
Difference between current assets and current liabilities — can be positive or negative.
Permanent (Fixed) WC?
The minimum level of current assets that a firm must always hold to carry on operations — irreducible core.
Temporary (Variable) WC?
Additional working capital needed to meet seasonal or cyclical fluctuations — built up and run down in line with business activity.
Adequate liquidity?
ensuring the firm always has enough cash and near-cash assets to meet its short-term obligations as they fall due.
Optimal profitability?
keeping idle current assets to a minimum so that capital is not blocked unproductively.
Finished goods holding period?
time finished goods stay in inventory before sale.
Nature of Business?
Public utilities (electricity, water, railways) sell mostly on cash terms — need very little working capital. Trading and financial firms need large working capital relative to fixed assets. Manufacturing falls between the two.
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