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
Free sample — 8 of 107 rapid-fire Q&A cards.
Define Working Capital.
Money tied up in raw materials, stocks, finished goods, receivables and cash for day-to-day operations.
Distinguish Gross vs Net Working Capital.
Gross WC = all current assets; Net WC = current assets minus current liabilities (long-term funds cushion).
What are the two objectives of Working Capital Management?
Adequate liquidity to meet obligations; optimal profitability by minimizing idle current assets.
Define Operating Cycle.
Cycle from raw material purchase → production → sale → cash collection → next purchase.
What five factors determine Operating Cycle length?
Raw material holding, work-in-process time, finished goods holding, receivables period, supplier credit period.
What are Accruals as a source of finance?
Automatic, cost-free, short-term liabilities (e.g., salary) that expand/contract with operations.
Name three factors influencing Trade Credit availability.
Industry practice, firm's payment record/reputation, liquidity position, profitability history.
Distinguish Fund-Based vs Non-Fund-Based bank facilities.
Fund-Based: cash leaves bank (Cash Credit, Overdraft, Demand Loan). Non-Fund-Based: bank's credit only (LC, BG).
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