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Unit 8: Working Capital Management
8.8 Self Assessment Notes
Fill in the blanks:
1. Total of all current assets ......................... .
2. The excess of current assets over current liabilities ......................... .
3. Gross operating cycle equal to inventory conversion period plus ......................... .
4. The time elapses between the receipt of raw materials and payment to suppliers .................
..................
5. Net operating cycle equal to gross operating cycle less ......................... .
6. When current assets are less than current liabilities then the resulting figure is .................. .
7. Components of working capital are ......................... .
8. The automatic sources of short-term funds arising in the normal course of business is
known as ......................... .
State whether the following statements are true or false:
9. Working capital is the part of current assets that are supposed to be financed by long-term
sources of fi nance.
10. Net working capital is the excess of current assets over current liabilities.
11. Negative working capital is the excess of current assets over current liabilities.
12. Trade credit is the source of working capital.
13. Operating cycle and cash cycle both are one and the same.
14. Depreciation is source of working capital.
15. In boom period working capital requirement is less.
16. Manufacturing companies require less amount of working capital.
17. Utilization of fixed assets depends on the availability of working capital.
18. Net operating cycle is equal to the gross operating cycle plus payables differed period.
8.9 Review Questions
1. From the following information RRR Company Ltd., for the next year, you are required
to estimate the working capital needed to finance a level of activity of 2,08,000 units of
production after adding a five per cent safety contingency.
Amount (per unit)
Raw materials 160
Direct labour 60
Overheads (including depreciation of `10) 130
Total cost 350
Profi t 50
Selling price 400
Additional information
Average raw materials in stock: one month
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