WORKING CAPITAL MANAGEMENT- I
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What is working capital?
Working capital is the difference between current assets and current liabilities, representing the funds available to meet day-to-day operational requirements of a business.
What is the primary objective of working capital management?
Maintain adequate liquidity to meet short-term obligations efficiently.
What does gross working capital refer to?
Gross working capital refers to the total investment in all current assets of a firm, including cash, receivables, inventory, and short-term investments, without deducting current liabilities.
What is the formula for calculating net working capital?
Net Working Capital = Current Assets minus Current Liabilities.
What is net working capital?
Net working capital is the excess of current assets over current liabilities, indicating the liquidity cushion available to meet short-term obligations.
What does a positive net working capital indicate about a firm?
Firm can cover short-term liabilities with current assets.
What is the operating cycle in working capital management?
The operating cycle is the time taken to convert raw materials into cash through production, sales, and collection, forming the basis for estimating working capital requirements.
What is the working capital gap in bank lending assessment?
Difference between current assets and current liabilities excluding bank borrowings.
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