Page 19 - DCOM505_WORKING_CAPITAL_MANAGEMENT

Working Capital Management

Notes 12. How can the differences between the returns on current and fixed assets and the cost of
current liabilities and long-term funds be used to determine how best to change a firm’s
net working capital?
13. “Uncertainty makes it difficult for a financial manager to predict the company’s
requirements for short-term funds”. Discuss. What steps can the financial manager take to
minimize the resulting risks to the company?
14. Why is no single working capital investment and financing policy necessarily optimal for
all firms? What additional factors need to be considered in establishing a working capital
policy?

Answers: Self Assessment

1. current assets 2. vertical

3. cash
4. purchasing resources, producing the product, distributing (selling) the product
5. cash conversion cycle 6. True
7. True 8. True
9. False 10. False

11. False 12. produced
13. spreads 14. Risk
15. More 16. optimal

17. No 18. shareholders
19. aggressive 20. profitability, return on capital

1.10 Further Readings

Books D.R. Mehta, Working Capital Management, Prentice-Hall Inc., 1974.
K.V. Smith, Management of Working Capital, McGraw-Hill, New York.
Khan and Jain, Financial Management, Tata McGraw-Hill.

Pandey, Financial Management, Vikas Annex. 54.J.3 -MBA - Finance - SDE Page
20 of 23.
Prasanna Chandra, Financial Management, Theory and Practice, Tata McGraw-Hill.

V.K. Bhalla, Working Capital Management – Text and Cases, Sixth Edition, Anmol
Publications.

Online links www.studyfinance.com

www.planware.org/workingcapital

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