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 Ccnam ~mdOr

 ZmH$mo‹S>m ^¡ad

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© Publishers

Working Capital Management

Author: Dr. Nirmal Jain

1st Edition

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Brilliant'S / Working Capital Management/ 2
 Working Capital
Management
UNIT 1. Working Capital: Concept, Definition, Types, Impor-
tance, Need and Objectives of Working Capital, Deter-
minants of Working Capital, Excess Working Capital
and Inadequate Working Capital, Disadvantages of
Excess Working Capital and Inadequate Working Capi-
tal, Operating Cycle-Concept
H$m¶©erb ny§Or: H$m¶©erb ny§Or H$s AdYmaUm, n[a^mfm, àH$ma, ‘hËd,
Amdí¶H$Vm Am¡a CX²Xoí¶, H$m¶©erb ny§Or Ho$ {ZYm©aH$ VËd, A{V[a³V
H$m¶©erb ny§Or Am¡a An¶m©ßV H$m¶©erb ny§Or, A{V[a³V H$m¶©erb ny§Or
Am¡a An¶m©ßV H$m¶©erb ny§Or Ho$ ZwH$gmZ, g§MmbZ MH«$ AdYmaUm
UNIT 2. Cash Management: Meaning, definition and nature of
cash. Motives for holding cash. Meaning of cash flow,
Determination of optimum cash balance, Cash Manage-
ment Models, Management of marketable securities.
ZH$Xr à~§YZ: ZH$Xr H$m AW©, n[a^mfm Am¡a àH¥${V& ZH$Xr aIZo H$m
CÔoí¶, ZH$Xr àdmh H$m AW©, Bï>V‘ ZH$Xr eof H$m {ZYm©aU, ZH$Xr
à~§YZ ‘m°S>b, {dnUZ ¶mo½¶ à{V^y{V¶m| H$m à~§YZ&
UNIT 3. Accounts Receivables Management & Factoring: Con-
cept and Definition of Receivables/Debtors, Cost of Main-
taining Receivable, The Factors Influencing the Size
of Receivables, Objectives of Receivable Management,
Factoring and Receivable Management, Types of Fac-
toring. / àm߶ ImVm| H$m à~§YZ Am¡a ’¡$³Q>[a¨J: àm߶/XoZXma H$s
AdYmaUm Am¡a n[a^mfm, àm߶ H$mo ~ZmE aIZo H$s bmJV, àm߶ Ho$
AmH$ma H$mo à^m{dV H$aZo dmbo H$maH$, àm߶ H$m nydm©Zw‘mZ, àm߶
à~§YZ Ho$ CX²Xoí¶, ’¡$ŠQ>[a¨J Am¡a àm߶ à~§YZ, ’¡$ŠQ>[a¨J Ho$ àH$ma&
UNIT 4. Inventory Management: Meaning and Nature of Inven-
tory, Purpose and Benefit of Holding Inventory, Risk and
Cost of Holding Inventories, Objectives of Inventory Man-
agement, Tools and Techniques of Inventory Manage-
ment. / BÝd|Q>ar ‘¡ZoO‘|Q: BÝd|Q>ar H$m AW© Am¡a àH¥${V, BÝd|Q>ar
aIZo H$m CX²Xoí¶ d bm^, BÝd|Q>ar aIZo Ho$ Omo{I‘ d bmJV, BÝd|Q>ar
‘¡ZoO‘|Q> Ho$ CX²Xoí¶, BÝd|Q>ar ‘¡ZoO‘|Q> Ho$ Qy>ëg Am¡a Q>op³Z³g&
UNIT 5. Working Capital Finance: Financing of Working Capital,
Determining the Working Capital Financing Mix, New
Trends in Financing of Working Capital by Banks, Latest
Committees Regarding Working Capital: Kannan Com-
mittee, Marathe Committee.
{dÎmr` H$m¶©erb ny§Or: H$m¶©erb ny§Or H$m {dÎm nmofU, H$m¶©erb ny§Or
{dÎm nmofU {‘lU H$m {ZYm©aU, ~¢³g Ûmam H$m¶©erb ny§Or Ho$ {dÎm
nmofU _| ZE ê$PmZ, H$m¶©erb ny§Or Ho$ g§~§Y ‘| ZdrZV‘ g{‘{V¶m±:
H$ÝZZ g{‘{V, ‘amR>o g{‘{V

 Working Capital
H$m¶©erb ny§Or
CONCEPT, DEFINITION AND TYPES OF WORKING CAPITAL
1
H$m¶©erb ny§Or H$s AdYmaUm, n[a^mfm Am¡a àH$ma
LONG ANSWER TYPE QUESTIONS
Q.1. What is working capital management? Explain the vari-
ous types of working capital management.
H$m¶©erb ny§Or à~§YZ Š¶m h¡? H$m¶©erb ny§Or à~§YZ Ho$ {d{^ÝZ
àH$ma g‘PmBE&
SHORT ANSWER TYPE QUESTIONS
1. What do you mean by working capital management?
H$m¶©erb ny§Or à~§YZ go AmnH$m Š¶m VmËn¶© h¡? 15
IMPORTANCE, NEEDS AND OBJECTIVE AND
DETERMINANTS OF WORKING CAPITAL
H$m¶©erb ny§Or Ho$ {ZYm©aH$ ‘hËd, Amdí¶H$VmE§ Am¡a CX²Xoí¶
LONG ANSWER TYPE QUESTIONS
Q.2. Why is it important to study the management of Work-
ing Capital as a separate area in Financial Management?
{dÎmr¶ à~§YZ ‘| EH$ AbJ joÌ Ho$ ê$n ‘| H$m¶©erb ny§Or Ho$ à~§YZ
H$m Aܶ¶Z Š¶m| ‘hËdnyU© h¡?
Brilliant'S / Working Capital Management/ 5
 SHORT ANSWER TYPE QUESTIONS
1. Why do we need working capital?
h‘| H$m¶©erb ny§Or H$s Amdí¶H$Vm Š¶m| hmoVr h¡? 18
EXCESS AND INADEQUATE WORKING CAPITAL AND ITS
DISADVANTAGES AND OPERATING CYCLE-CONCEPT
A{V[a³V VWm An¶m©ßV H$m¶©erb ny§Or VWm BgHo$ ZwH$gmZ Am¡a
g§MmbZ MH«$-AdYmaUm
LONG ANSWER TYPE QUESTIONS
Q.3. What will be the consequences of shortage and excess of
Working Capital?/ H$m¶©erb ny§Or H$s H$‘r Am¡a A{YH$Vm Ho$ Š¶m
n[aUm‘ hm|Jo?
OR
What will be the disadvantages of inadequate Working
Capital? / An¶m©ßV H$m¶©erb ny§Or Ho$ ZwH$gmZ Š¶m hm|Jo?
SHORT ANSWER TYPE QUESTIONS
1. Discuss the disadvantages of inadequate working capital.
An¶m©ßV H$m¶©erb ny§Or Ho$ ZwH$gmZm| na MMm© H$s{OE& 34
 Solved Practical Questions 33

 Review Questions 39

 Objective Questions 40

Cash Management
ZH$Xr à~§YZ
CASH AND LIQUID MANAGEMENT, MOTIVES FOR HOLDING
2
H¡$e VWm {bp³dS> ‘¡ZoO‘|Q>, H¡$e aIZo H$m CX²Xoí¶
LONG ANSWER TYPE QUESTIONS
Q.4. What is cash and liquid management? Explain in detail.
ZH$Xr Ed§ Vab à~§YZ Š¶m h¡? {dñVma go ì¶m»¶m H$s{OE&
OR

Brilliant'S / Working Capital Management/ 6

 Explain the various motives of holding cash and also
discuss the nature of cash./ ZH$Xr aIZo Ho$ {d{^ÝZ CX²Xoí¶m|
H$s ì¶m»¶m H$s{OE Am¡a ZH$Xr H$s àH¥${V na ^r MMm© H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. Discuss the meaning and nature of cash and cash man-
agement.
ZH$Xr Am¡a ZH$Xr à~§YZ Ho$ AW© Am¡a àH¥${V na MMm© H$s{OE& 44
MEANING OF CASH FLOWS, DETERMINATION OF
OPTIMUM CASH BALANCE
ZH$Xr àdmh H$m AW©, CÀMV‘ ZH$Xr g§VwbZ H$m {ZYm©aU
LONG ANSWER TYPE QUESTIONS
Q.5. Discuss the meaning of cash flows and how to deter-
mine the balance of optimum cash? / ZH$Xr àdmh Ho$ AW© Ed§
CÀMV‘ ZH$Xr g§VwbZ Ho$ {ZYm©aU na MMm© H$s{OE?
SHORT ANSWER TYPE QUESTIONS
1. Explain cash cycle, and meaning of cash.
ZH$Xr MH«$ Am¡a ZH$Xr H$m AW© g‘PmBE& 49

CASH MANAGEMENT MODELS / ZH$Xr à~§YZ ‘m°S>b

LONG ANSWER TYPE QUESTIONS
Q.6. Describe the various models of Cash Management. How
do they provide optimum strategies for investment and
disinvestment?
ZH$Xr à~§YZ Ho$ {d{^ÝZ ‘m°S>ëg H$m dU©Z H$s{OE& do {Zdoe Am¡a
{d{Zdoe Ho$ {bE CÀMV‘ aUZr{V¶m± H¡$go àXmZ H$aVo h¢?
SHORT ANSWER TYPE QUESTIONS
1. Explain any two models of cash management.
ZH$Xr à~§YZ Ho$ {H$Ýht Xmo ‘m°S>ëg H$s ì¶m»¶m H$s{OE& 52
MANAGEMENT OF MARKETABLE SECURITIES
{dnUZ ¶mo½¶ à{V^y{V¶m| H$m à~§YZ
LONG ANSWER TYPE QUESTIONS
Q.7. What are the principles to be considered while investing
short-term cash surplus in marketable securities?

Brilliant'S / Working Capital Management/ 7

 {dnUZ ¶mo½¶ à{V^y{V¶m| ‘| AënH$m{bH$ ZH$Xr A{Yeof H$m {Zdoe
H$aVo g‘¶ {H$Z {gÕm§Vm| na {dMma {H$¶m OmZm Mm{hE?
SHORT ANSWER TYPE QUESTIONS
1. Write a short note on the investment of idle cash in readily
marketable securities. / AmgmZr go {dnUZ ¶mo½¶ à{V^y{V¶m| ‘|
{ZpîH«$¶ ZH$Xr Ho$ {Zdoe na EH$ g§{jßV {Q>ßnUr {b{IE& 57
 Review Questions 61

 Objective Questions 62

CONCEPT AND DEFINITION OF RECEIVABLES, COST OF

3
MAINTAINING RECEIVABLE
àm߶ H$s AdYmaUm Am¡a n[a^mfm, àm߶ H$mo ~ZmE aIZo H$s bmJV
LONG ANSWER TYPE QUESTIONS
Q.8. Explain the receivable management and its benefits.
àm߶ à~§YZ Am¡a CgHo$ bm^m| H$s ì¶m»¶m H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. What do you mean by "concept of credit"? Write down
any three benefits of receivables.
''H«o${S>Q> H$s AdYmaUm'' go AmnH$m Š¶m VmËn¶© h¡? àm߶ Ho$ H$moB©
VrZ bm^ {b{IE& 67
FACTORS INFLUENCING THE SIZE OF RECEIVABLES,
FORECASTING OF RECEIVABLE
àm߶ Ho$ AmH$ma H$mo à^m{dV H$aZo dmbo H$maH$, àm߶ H$m nydm©Zw‘mZ
LONG ANSWER TYPE QUESTIONS
Q.9. What are the factors that influence the size of receivable?
Also discuss credit policy and its components.
H$m¡Z go H$maH$ h¢, Omo àm߶ Ho$ AmH$ma H$mo à^m{dV H$aVo h¢? H«o${S>Q>
Zr{V Am¡a CgHo$ KQ>H$m| na ^r MMm© H$s{OE&
OR

Brilliant'S / Working Capital Management/ 8

 What is receivables management and how to forecast
receivable? Give its importance. / àm߶ à~§YZ Š¶m h¡ Am¡a
àm߶ H$m nydm©Zw‘mZ H¡$go bJm¶m OmE? BgH$m ‘hËd Xr{OE&
SHORT ANSWER TYPE QUESTIONS
1. What do you mean by '2/10, net 30'?
'2/10, ZoQ> 30' go AmnH$m Š¶m VmËn¶© h¡? 71
OBJECTIVES OF RECEIVABLE MANAGEMENT, FACTORING
AND RECEIVABLE MANAGEMENT, TYPES OF
FACTORINGàm߶ à~§YZ Ho$ CÔoí¶, ’¡$ŠQ>[a¨J Am¡a àm߶ à~§YZ,
’¡$ŠQ>[a¨J Ho$ àH$ma
LONG ANSWER TYPE QUESTIONS
Q.10. Explain the objective of receivable management.
àm߶ à~§YZ H$m CX²Xoí¶ g‘PmBE&
OR
Discuss account receivable management and its various
objectives that define the credit policy and period.
àm߶ ImVm à~§YZ Am¡a BgHo$ {d{^ÝZ CX²Xoí¶m| na MMm© H$s{OE, Omo
H«o${S>Q> nm°{bgr d Ad{Y H$mo n[a^m{fV H$aVo h¢&
SHORT ANSWER TYPE QUESTIONS
1. Discuss integrated and structured credit approval process.
EH$sH¥$V Am¡a g§a{MV H«o${S>Q> AZw‘moXZ à{H«$¶m na MMm© H$s{OE& 76

FACTORING / ’¡$³Q>[a¨J

LONG ANSWER TYPE QUESTIONS

Q.11. What is Factoring? Also explain the different types of
Factoring. How can a large credit selling company get
benefits of Factoring? Explain. / ’¡$³Q>[a¨J ³¶m h¢? ’¡$³Q>[a¨J
Ho$ {S>’$a|Q> Q>mBßg H$mo ^r g‘PmB¶o& H¡$go EH$ cmO© H«o${S>Q> goqcJ
H§$nZr ’¡$³Q>[a¨J H$m cm^ co gH$Vr h¡? g‘PmB¶o&
OR
What is Factoring? How does it become sources of
immediate finance for an organization? Discuss the
process of factoring.
’¡$³Q>[a¨J ³¶m h¡? ¶h EH$ Am°J}ZmBOoeZ Ho$ {cE B{‘{S>EQ> ’$m¶Z|g
Ho$ gmog© H¡$go ~ZVo h¢? ’¡$³Q>[a¨J H$s àmogog na ^r àH$me S>m{cE&
Brilliant'S / Working Capital Management/ 9
 SHORT ANSWER TYPE QUESTIONS
1. What is factoring? Discuss the cost of factoring.
’¡$ŠQ>[a¨J Š¶m h¡? ’¡$ŠQ>[a¨J H$s bmJV na MMm© H$s{OE& 79
 Solved Practical Questions 89

 Review Questions 93

 Objective Questions 94

MEANING AND NATURE OF INVENTORY, PURPOSE AND

4
BENEFIT OF HOLDING INVENTORY
BÝd|Q>ar H$m AW© Am¡a àH¥${V, BÝd|Q>ar aIZo H$m CX²Xoí¶ d bm^
LONG ANSWER TYPE QUESTIONS
Q.12. What is inventory and its nature? Explain in detail.
BÝd|Q>ar Am¡a BgH$s àH¥${V Š¶m hmoVr h¡? g{dñVma ì¶m»¶m H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. What do you mean by inventory management?
102
BÝd|Q>ar à~§YZ go AmnH$m Š¶m VmËn¶© h¡?
RISK AND COST OF HOLDING INVENTORIES, OBJECTIVES
OF INVENTORY MANAGEMENT
BÝd|Q>ar aIZo Ho$ Omo{I‘ d bmJV, BÝd|Q>ar à~§YZ Ho$ CX²Xoí¶
LONG ANSWER TYPE QUESTIONS
Q.13. Discuss the risk and cost of holding inventory.
BÝd|Q>ar aIZo Ho$ Omo{I‘ Am¡a bmJV na MMm© H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. Write down any four objectives of inventory management.
BÝd|Q>ar à~§YZ Ho$ H$moB© Mma CX²Xoí¶ {b{IE&
2. Discuss the various components of cost.
bmJV Ho$ {d{^ÝZ KQ>H$m| na MMm© H$s{OE& 106
Brilliant'S / Working Capital Management/ 10
 TOOLS AND TECHNIQUES OF INVENTORY MANAGMENT
BÝdoÝQ>ar ‘¡ZoO‘oÝQ Ho$ Qy>ëg Am¡a Q>op³Z³g
LONG ANSWER TYPE QUESTIONS
Q.14. What is inventory management? Also explain the pro-
cess of Inventory management. / BÝdoÝQ>ar ‘¡ZoO‘oÝQ> ³¶m h¡?
BÝdoÝQ>ar ‘¡ZoO‘oÝQ> H$s àmogog H$mo g‘PmBE&
SHORT ANSWER TYPE QUESTIONS
1. How can EOQ model be applied in determining opti-
mum cash balance of firm? / ’$‘© Ho$ gdm}ËV‘ ZH$Xr eof Ho$
{ZYm©aU ‘| EOQ ‘m°S>b H¡$go bmJy {H$¶m Om gH$Vm h¡? 111
 Solved Practical Questions 124

 Review Questions 133

 Objective Questions 135

FINANCING OF WORKING CAPITAL, DETERMINING THE

5
WORKING CAPITAL FINANCING MIX / d{Hª$J H¡${nQ>b H$s
’$m¶Z|qgJ, d{Hª$J H¡${nQ>b ’$m¶Z|qgJ {‘³g H$m {ZYm©aU
LONG ANSWER TYPE QUESTIONS
Q.15. What do you mean by financing of Working Capital?
Also determine the Working Capital financing mix.
d{Hª$J H¡${nQ>b H$s ’$m¶Z|qgJ go AmnH$m Š¶m VmËn¶© h¡? d{Hª$J
H¡${nQ>b ’$m¶Z|qgJ {‘³g ^r {ZYm©[aV H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. Write short notes on: / {ZåZ{b{IV na g§{jßV {Q>ßnUr {b{IE:
(i) The Hedging or Matching Approach
hoqOJ ¶m ‘¡qMJ ÑpîQ>H$moU,
(ii) The Conservative Approach / H§$µOd}{Q>d ÑpîQ>H$moU,
(iii) The Aggressive Approach, and / EJ«o{gd ÑpîQ>H$moU, Am¡a
(iv) Purchase Order Financing / nM}g Am°S>©a ’$m¶Z|qgJ 139

Brilliant'S / Working Capital Management/ 11

 NEW TRENDS IN FINANCING OF WORKING CAPITAL BY
BANKS / ~¢³g Ûmam d{Hª$J H¡${nQ>b H$s ’$m¶Z|qgJ ‘| Z¶o Q´>|S²>g
LONG ANSWER TYPE QUESTIONS
Q.16. Discuss the Working Capital Financing by bank.
~¢H$ Ûmam d{Hª$J H¡${nQ>b ’$m¶Z|qgJ na MMm© H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. Write short notes on: / {ZåZ{b{IV na g§{jßV {Q>ßnUr {b{IE:
(i) Working capital finance by bank
~¢H$ Ûmam d{Hª$J H¡${nQ>b ’$m¶Z|g
(ii) Types of bank finance / ~¢H$ ’$m¶Z|g Ho$ àH$ma
(iii) Letter of credit / boQ>a Am°’$ H«o${S>Q>
(iv) Discounting of bills / {~ëg H$s {S>ñH$mC§qQ>J
(v) Working capital loans / d{Hª$J H¡${nQ>b bmoÝg 145
LATEST COMITTEES REGARDING WORKING CAPITAL:
KANNAN COMMITTEE, MARATHE COMMITTEE ETC.
d{Hª$J H¡${nQ>b go g§~§{YV ZdrZV‘ g{‘{V¶m§:
H$ÝZZ g{‘{V, ‘amR>m g{‘{V Am{X
LONG ANSWER TYPE QUESTIONS
Q.17. What are the types of committees regarding Working
Capital?
d{Hª$J H¡${nQ>b go g§~§{YV g{‘{V¶m| Ho$ àH$ma ³¶m h¢?
OR
Discuss the latest committees regarding working capital.
d{Hª$J H¡${nQ>b go g§~§{YV ZdrZV‘ g{‘{V¶m| na MMm© H$s{OE&
SHORT ANSWER TYPE QUESTIONS
1. What are the various recommendations of "Kannan Com-
mittee"?
''H$ÝZZ g{‘{V'' H$s {d{^ÝZ AZwe§gmE§ Š¶m h¢? 151
 Solved Practical Questions 161

 Review Questions 164

 Objective Questions 166

T-20 Question 172

Brilliant'S / Working Capital Management/ 12 

T-20 Questions