Page 160 - DMGT409Basic Financial Management

Unit 8: Working Capital Management

4. DP Mills Limited has the following information as for the year 2003. Notes

Sales – ` 3782.79 lakhs Cost of Goods sold – ` 3444.47 lakhs
Opening inventory – ` 856.25 lakhs closing inventory ` 1037.73 lakhs
Accounts Receivables: Opening – ` 852 lakhs, Closing – ` 636.88 lakhs
Accounts Payables: Opening: ` 832.96 lakhs Closing : 84689 lakhs
Calculate (a) OC and (b) CCC
5. Discuss the steps involved in estimation of working capital needed by a fi rm.

6. What is working capital? Is there any significant difference in the concepts of gross working
capital and net working capital? Discuss in detail.
7. What is working capital management? What is the need to maintain optimum working
capital? Discuss the consequences of inadequate and excess working capital.
8. What is cash cycle or net operating cycle?
9. Discuss the significance of gross working capital and net working capital.

10. “Working capital must be adequate but at the same time not excessive”. Comment.

Answers: Self Assessment

1. Gross working capital 2. Net working capital
3. Debtors collection period 4. Cash cycle
5. payables differed period 6. Negative working capital
7. Current assets and current liabilities 8. Spontaneous

9. True 10. True
11. False 12. True
13. False 14. True
15. False 16. False
17. True 18. True

8.10 Further Readings

Books Chandra, P., Financial Management - Theory and Practice, New Delhi, Tata McGraw
Hill Publishing Company Ltd., 2002, p. 3.
Sudhindra Bhat, Financial Management, New Delhi, Excel Books, 2008.
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.

Online link http://www.fei.org/

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