Page 51 - DCOM505_WORKING_CAPITAL_MANAGEMENT

Working Capital Management

Notes 3.4 Review Questions

1. If a firm has accrued expenses, it should definitely have some unaccrued expenses. Give
examples and discuss the significance of such unaccrued expenses.

2. Prove that the deferred incomes increase a firm’s liquidity.
3. A buyer has a prepayment. What does it show and why?
4. Evaluate the role of commercial banks in industrial finance in India.

5. Why are letter of credits (L/Cs) and bank guarantees (B/Gs) known as quasi-credit facilities?
6. Analyse and list at least three advantages and three disadvantages of overdraft facility.
7. In your opinion, why it might be difficult for a new firm to get trade credit?
8. Critically evaluate the importance of accrued expenses.
9. What is the significance of commercial papers in economies like India?

10. Should the deferred payment be included in Profit & Loss of a firm? Why/why not?

Answers: Self Assessment

1. Financing 2. Commercial banks
3. Loan 4. Overdraft
5. Cash balances 6. Factor

7. Promissory note 8. Financial statements
9. Easy availability, flexibility, informality 10. Activities

3.5 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.agmrc.org/media/

www.businessfinance.com
www.bdc.ca
www.jstor.org/stable/10.2307/4374770

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