- World's Largest Collection of Interview Questions & Answers, FAQs, queries, sample papers, exam papers, dumps, what, why, how, where, when questions
Our Services
Get 9,000 Interview Questions & Answers in an eBook.

Get it now !!
Send your Resume to 6000 Companies
Working Capital Management Interview Questions & Answers - Learning Mode

Working Capital Management Interview Questions & Answers - Learning Mode

Working capital is the difference between the inflow and outflow of funds. In other words, it is the net cash inflow. It is defined as the excess of current assets over current liabilities and provisions. In other words it is "net current assets or net working capital".The primary purpose of working capital management is to make sure the company always maintains sufficient cash flow to meet its short-term operating costs and short-term debt obligations.

Try Working Capital Management Interview Questions & Answers - Exam Mode

1 2 3 Next

Sort By : Latest First | Oldest First | By Rating

Working Capital Management Interview Questions & Answers - Learning Mode
Try Working Capital Management Interview Questions & Answers - Exam Mode
Question: What is permanent working capital?

Answer: Permanent working capital is the minimum amount of current assets which is needed to conduct a business even during the dullest season of the year. It is the amount of fund required to produce the goods and services which is necessary to satisfy demand at a particular point. It represents the current assets which are necessary to satisfy demand at a particular point. Source:
Question: What are the factors affecting Fixed Capital requirement?

Answer: 1.Nature of business
2.Types of Products
3.Size of the firms
4.Diversity of production lines
5.Method of handling production
6.Method of acquiring the fixed assets Source:
Question: State the principles of working capital management.

Answer: a) Principle of Risk Variation
b) Principle of Cost of Capital
c) Principle of Equity Position
d) Principle of Maturity of Payment Source:
Question: State the cash management models.

Answer: Certain models have been developed to manage the cash. These models assist in determining the optimum cash to be held by the enterprise. The models are:
a) Baumol Model
b) Miller- orr Model
c) Orgler's Model Source:
Question: What are the characteristics of permanent working capital?

Answer: a) It is classified on the basis of time factor.
b) It constantly changes from one asset to another and continues to remain in the business process.
c) Its size increases with the growth of business operations. Source:
Question: State the tools of inventory management.

Answer: i) Fixation of levels.
ii) ABC analysis
iii) EOQ
iv) Perpetual inventory system
v) VED analysis
vi) FSN analysis
vii) Periodical inventory evaluation
Question: Explain the five C's of credit rating.

Answer: 1. Character:- Character refers to the temperament of the customer. It is to be judged whether the customer is honest and is prompt in paying the dues that he had undertaken to pay.
2. Capacity:- Capacity refers to the ability of the customer to pay back the purchase price. This can be measured by conducting a detailed investigation of his dealings, his past actions, his possessions, his business methods etc.
3. Capital:- Capital refers to the financial soundness of the customers. This can Source:
Question: What is the difference between Fixed and Working Capital?

Answer: Fixed capital investments represent the acquisition and maintenance of long-term assets. A fixed capital investment can be tangible asset,such as a building, or an intangible asset, such as an intellectual property. Working capital refers to the deployment of financial resources in the day-to-day business operations. Source:
Question: State the characteristics that a working capital term loan should possess.

Answer: A working capital term loan should possess specific characteristics as laid down below:
a) WCTL is a shortage "long- term surplus" or net working capital (NWC) in a unit that a bank chooses to fund.
b) It is a long- term need of the unit that is met by the bank through its short- term portfolios.
c) It must be repaid in a prescribed maximum number of instalments.
d) It is a sort of "once- in- a life- time" loan. Source:
Question: What are the factors affecting Working Capital requirements?

Answer: 1. Size Of Business
2. Nature Of Business
3. Storage Time Or Processing Period
4. Credit Period
5. Seasonal Requirement
6. Potential Growth Or Expansion Of Business
7. Changes In Price Level Source:
Question: What is full service factoring?

Answer: This method is one of the popular factoring service practised in India. Under this system, factor, provides finance, maintains sales ledger, undertakes credit collection, offers protection against bad debts and offer consultancy services. Source:
Question: What is negative working capital?

Answer: Negative working capital emerges when current liabilities exceed current assets. Such a situation is not absolutely theoretical, and occurs when a firm is nearing a crisis of some magnitude. Source:
Question: What is working capital?

Answer: Working capital may be regarded as lifeblood of business. Working capital is the difference between the inflow and outflow of funds. It is also referred as the excess of current assets over current liabilities and provisions. Working capital is a measure of both a company's efficiency and its short-term financial health. Source:
Question: What is agency factoring?

Answer: This is a unique type of factoring arrangement in which the risks and responsibility of clients and factors are clearly defined. Client takes the responsibility of maintaining the sales ledger administration and collection of debts from the customers. Factor assumes the responsibility of down payment/ pre- payment facility to the client and protect the client against bad debts. Source:
Question: What is Balance Sheet working capital?

Answer: The balance sheet working capital is one which is calculated from the items appearing in the balance sheet. Gross working capital, which is represented by the excess of current assets, and net working capital, which is represented by the excess of current assets over current liabilities, are examples of the balance sheet working capital. Source:
Question: Explain the short- term forecasting methods.

Answer: Two most commonly used short- term cash forecasting are:
1. Receipts and Disbursement Method:- Cash flows and outflows are maintained by companies on continuous basis. The prime aim of receipts and disbursements forecasts is to summarise these flows during a predetermined period. This method is favoured to keep a close control over cash.
2. Adjusted Net Income Method:- This method of cash forecasting involves the tracing of working capital flows. It is sometimes called the sources and uses Source:
Question: State the features of factoring.

Answer: 1. Client can get 80 percent of the invoice amount from the factor after the factoring agreement.
2. Clients shift responsibility of credit collection from the customers.
3. The responsibility of maintaining credit sales ledger vests with the factor.
4. The client will have easy access to know the details of credit sales.
5. Client has to pay service charges in addition to the interest and funded amount to the factor. Source:
Question: What is gross working capital? What are its advantages?

Answer: Gross working capital is the amount of funds invested in the various components of current assets. This concept has the following advantages:
a) Gross working capital provides the correct amount of working capital at the right time.
b) It enables a firm to realize the greatest return on its investment.
c) It helps in the fixation of various areas of financial responsibility.
d) It enables a firm to plan and control funds and to maximise the returns on investment. Source:
Question: What is inventory management?

Answer: It refers to stock, raw materials, components, spares or work progress maintained in an organisation to have continuous production and sales. Inventory management is one of the component of working capital management. It involves the process of providing continuous flow of raw materials to production department.
Question: What is long- term cash forecasting? Also state its uses.

Answer: Long- term cash forecasts are prepared to give an idea of the company's financial requirements. Once a company has developed a long- term cash forecast, it can be used to evaluate the impact of new product development or plant acquisition on the firm's financial position; three, five or more years in future. The major uses of the long- term cash forecasts are:
1. It indicates a company's future financial needs, especially for its working capital requirements.
2. It helps in eva Source:

1 2 3 Next

India News Network
Latest 20 Questions
Payment of time- barred debt is: (a) Valid (b) Void (c) Illegal (d) Voidable
Consideration is defined in the Indian Contract Act,1872 in: (a) Section 2(f) (b) Section 2(e) (c) Section 2(g) (d) Section 2(d)
Which of the following is not an exception to the rule, "No consideration, No contract": (a) Natural love and affection (b) Compensation for involuntary services (c) Completed gift (d) Agency
Consideration must move at the desire of: (a) The promisor (b) The promisee (c) The promisor or any other party (d) Both the promisor and the promisee
An offer which is open for acceptance over a period of time is: (a) Cross Offer (b) Counter Offer (c) Standing Offer (d) Implied Offer
Specific offer can be communicated to__________ (a) All the parties of contract (b) General public in universe (c) Specific person (d) None of the above
_________ amounts to rejection of the original offer. (a) Cross offer (b) Special offer (c) Standing offer (d) Counter offer
A advertises to sell his old car by advertising in a newspaper. This offer is caleed: (a) General Offer (b) Special Offer (c) Continuing Offer (d) None of the above
In case a counter offer is made, the original offer stands: (a) Rejected (b) Accepted automatically (c) Accepted subject to certain modifications and variations (d) None of the above
In case of unenforceable contract having some technical defect, parties (a) Can sue upon it (b) Cannot sue upon it (c) Should consider it to be illegal (d) None of the above
If entire specified goods is perished before entering into contract of sale, the contract is (a) Valid (b) Void (c) Voidable (d) Cancelled
______________ contracts are also caled contracts with executed consideration. (a) Unilateral (b) Completed (c) Bilateral (d) Executory
A offers B to supply books @ Rs 100 each but B accepts the same with condition of 10% discount. This is a case of (a) Counter Offer (b) Cross Offer (c) Specific Offer (d) General Offer
_____________ is a game of chance. (a) Conditional Contract (b) Contingent Contract (c) Wagering Contract (d) Quasi Contract
There is no binding contract in case of _______ as one's offer cannot be constructed as acceptance (a) Cross Offer (b) Standing Offer (c) Counter Offer (d) Special Offer
An offer is made with an intention to have negotiation from other party. This type of offer is: (a) Invitation to offer (b) Valid offer (c) Voidable (d) None of the above
When an offer is made to the world at large, it is ____________ offer. (a) Counter (b) Special (c) General (d) None of the above
Implied contract even if not in writing or express words is perfectly _______________ if all the conditions are satisfied:- (a) Void (b) Voidable (c) Valid (d) Illegal
A specific offer can be accepted by ___________. (a) Any person (b) Any friend to offeror (c) The person to whom it is made (d) Any friend of offeree
An agreement toput a fire on a person's car is a ______: (a) Legal (b) Voidable (c) Valid (d) Illegal
Cache = 0.109375 Seconds