Creditors velocity = 2 months. Updated on: 5 January 2023. (C) Contingencies are not considered in financial management; it is considered in accounts only This reduces immediate cash flow. Annual credit sales Cash sales Debtors Bills receivable Finished goods Collection Period = ? Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. Sales 46.80 lakh (25% cash sales and balance on credit): 78,000 units (A) Holding period (D) 49,41,813 (A) Working capital turnover ratio In valuation, the focus is on noncash working capital. (D) Trading capital (B) 7596 of Current Assets Current Liabilities. (A) 76,75,550 Which of the following is determinant of working capital? Permanent working capital has the following characteristics: (a) It is classified on the basis of the time factor; (b) It constantly changes from one asset to another and continues to remain in the business process; . (D) none of the above Creditors 17,55,000 (A) Matching/hedging Approach How much of creditors will be shown in preparation of working capital statement? A firm's permanent working capital refers to the: Multiple Choice difference between fixed assets and current assets. Answer: (D) Making greater use of long term finance and maximizing net short term asset. Purchases = 4,20,000 Which of the following is correct formula to calculate credit period availed? Stock = ? of operating cycle in a year = 4.5 (D) Cost of Sales (A) 19.71% (C) 42,64,000, Question 123. (B) Work-in-progress capital compounded monthly. Its current liability are 1,60,000 which includes provision for tax 60,000. Rate of gross profit for export sale has to be taken 10%. Answer: is revolutionizing the business lending process, making it faster and easier than ever to get matched with the optimal lender. (C) Operating cycle approach By forecasting sales, manufacturing, and operations, a company can guess how each of those three elements will impact current assets and liabilities. (B) 49,29,313 (C) 12,000 (B) current assets minus current liabilities. A positive working capital means that Question 149. (D) All of the above, Question 11. At the end of 2021, Microsoft (MSFT) reported $174.2 billion of current assets. In Current Ratio. (D) All of the above 2,80,000 = 2.4y y If Microsoft were to liquidate all short-term assets and extinguish all short-term debts, it would have almost $100 billion of cash remaining on hand. Creditors Turnover Ratio = ? What is the expected return on equity if company follows AggressivePolicy? Answer: (B) 24,00,000, Question 128. Answer: (D) Neither (A) nor (B) (2) Stock of WIP (A) 75% of (Current Assets Current Liabilities), Question 38. The major raw material to manufacture cement is limestone which is obtained on cash basis from a company located near the plant. (B) How many time account receivable is collected Working capital, also known as net working capital (NWC), is the difference between a company's current assets such as cash, accounts receivable/customers' unpaid bills, and inventories of. If you are appointed to prepare working capital statement for the company, then how much outstanding wages you will take while preparing working capital statement? (D) Capital relating to main projects of the company The following cost information per unit has been ascertained for annual production of 36,000 units: Current ratio =\( \frac{4,00,000}{3,00,000}=1.33\), Question 97. (A) 57,41,813 (D) (B) & (C) is correct. Answer: (D) Trade-off between short-term versus long-term borrowing. Answer: (D) Data given is not sufficient The company produces cement in200 kg drum. ), Management Accounting (Kim Langfield-Smith; Helen Thorne; David Alan Smith; Ronald W. Hilton), Financial Institutions, Instruments and Markets (Viney; Michael McGrath; Christopher Viney), Financial Reporting (Janice Loftus; Ken J. Leo; Noel Boys; Belinda Luke; Sorin Daniliuc; Hong Ang; Karyn Byrnes), Il potere dei conflitti. For 1st & 2nd week: in the 3rd week (D) Any of the above (C) 29,00,000 (A) Acid test days, Question 72. NS Ltd. gives the following information: (D), Question 20. (B) A higher current ratio is always preferred to a lower current ratio. Therefore, companies that are using working capital inefficiently or needing extra capital upfront can boost cash flow by squeezing suppliers and customers. Question 148. (A) 50,000 drums It fluctuates over time. (B) 32,500 (A) 4,70,000 Which best describes the gross margin ratio? For example, Microsoft's working capital of $96.7 billion is greater than its current liabilities. PWC(permanent working capital) implies a WCs part where a minimum amount of CA is needed(locked up) so that the firm or company can run its business operations smoothly for a year and is computed by the minimum difference between CA and CL. Following details are available for Pratik Ltd. Determine net cash flow from financing activities. Answer: Answer: Fixed assets are 6,00,000 and the firm plans to maintain a 50% debt-to-assets ratio. As the result, net working capital indicates the financing needs of a firm, both through long-term and short-term financing sources. Opening and closing stock of SVK Ltd. is 1,20,000 & 1,80,000 respectively. Debtors velocity = 3 months (C) 5096 of Current Assets Current Liabilities For reducing and controlling working capital requirement which of the following step is required to be taken Question 42. 2. (D) Goods that can be sold within a short span of time Cash sales = 5,00,000 Managing working capital has a significant impact on the financial performance of firms. (C) Variable If a firm has 100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to 1.1, what is the firms Net Working Capital? (D) 55,64,000 Understanding Coca-Cola's Capital Structure (KO). It might indicate that the business has too much inventory, not investing its excess cash, or not capitalizing on low-expense debt opportunities. Which of the following would NOT improve the current ratio? Question 52. Side note: If you see your working capital finance is starting to take a dip, consider taking a permanent working capital loan. (D) 8,00,000 x = Annual Cost of Production 14,60,000, Question 96. The size of fixed working capital is proportional to the magnitude and growth of the business. (D) 1.33 (D) 20,875 You borrow $200,000. (C) 10,000, Question 122. Answer: From the following information calculate the net working capital: Similarly to how the A/C can help you get through the heat, temporary working capital can help your business survive during seasonal fluxes. When a working capital calculation is positive, this means the company's current assets are greater than its current liabilities. (C) is the amount of current assets required to meet a firms long-term minimum needs. It is mainly concerned with the fact that funds are not unnecessarily locked in current assets. Answer: A) firm uses no debt in its capital structure. x = Current Assets = 20,93,250 (A) Fixed Assets A firm's permanent working capital refers to the: A. difference between current assets and current liabilities. (B) Company has positive working capital, Question 5. The loan requires 20 quarterly repayments at an interest rate of 8% p.a. (C) Stock, Question 76. (D) Cost of Sales Permanent working capital financed with long-term liabilities. (B) Over trading Working capital is a highly effective barometer of a company's efficiency and effectiveness. Stock or inventory in an organization means (D) 1,92,50,000 Total assets 60,00,000 Labour cost: 6 per unit Total wages = 78,000 6 = 4,68,000 (A) Goods that are readily available for sale (2) Manufacturing cycle (D) Both ratios are expressed in number of times receivables are collected per year (B) 10,00,000 Answer: (C) the firm may not be able to achieve its sale target (B) 32,830 A firm's permanent working capital refers to the: A. (B) higher risk and poor liquidity Answer: (C) the company has negative earnings before interest and tax Just because youre running a small business, doesnt mean it has to stay that way., Getting a small business loan can beone of the more challenging aspects of running a, What came first the job or the experience? (C) (1), (2) and (3) only (A) 57,41,813 Current liabilities are 70,00,000. Most of the time, long-term financial options are used to get fixed working capital. Assertion (A): Working capital refers to the gross working capital and represents the amount of funds invested in current assets. x = Account Receivable = 6,25,000 (D) All of the above (B) Cash (D) (1), (2), (3) and (4), Question 17. (C) Fixed working capital (B) 157 days $720.000 O c. $1,030,000 OD. (C) 18,00,000 Working Capital 1,200 1,000 200, Question 129. (B) Net working capital Raw material consumption= 6,48,000 Raw material purchase = 8,42,000 Annual cost of production = 14,42,000 Creditors = 75,000 Question 26. (D) 0.95 (D) 1,10,00,726 Now do that for each month. Gross working capital indicates firm's investment and financing of current assets. Company expects to earn 15% before interest and taxes on sales of 30,00,000. Answer: (B) Long term working capital (B) (A) and (C) (B) Cash sales, Question 74. (D) 4,60,000 Once youve got that list, simply find the smallest number. Current Ratio 2.8 Answer: (C) Liquidity Ratios Therefore, the company would be able to pay every single current debt twice and still have money left over. Answer: (C) 12,89,625 57,41,813 = 0.75 (x 32,50,000) (i) Reduction of manufacturing cycle. Which of the following is/are method of maximum permissible bank finance as recommended by the Tandon Committee? (C) Making greater use of short term finance and minimizing net short term asset. A company can improve its working capital by increasing its current assets. (B) 11,667 (D) 3,00,000 Raw materials 30% Equity share capital 18,00,000 Well, consider the fact that permanent working capital actually, The precise value of your businesss fixed working capital will be relative to the size of your business, as well as the value of your current assets and your current liabilities. Working capital management is a business strategy designed to ensure that a company operates efficiently by monitoring and using its current assets and liabilities to their most effective use.. 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Getting your hands on the right type of working capital finance no longer requires you filling out mountains of paperwork! (C) Stock Overheads accrue evenly throughout the year, total overheads incurred by the company are (D) 90,000; 31,920, Question 130. = [0.75 (960 60)] 360 Purchases = 4,20,000 (C) Cost of Goods Sold (B) That the Profitability has gone up History and Philosophy of Psychology (PSY30013), Certificate IV in Building Design Drafting (CPP40115), Integrated Marketing Communications (024210), Foundations Of Professional Practice 1B (NURS1201), Promoting Mental Health and Wellbeing 1 (401013), Microbes Infection and Immunity (MEDS2004), Foundations of Nursing Practice 2 (NURS11154), Applications of Functional Anatomy to Physical Education (HB101), Anatomy For Biomedical Science (HUBS1109), Economics for Business Decision Making (BUSS1040), Introducing Quantitative Research (SOCY2339), 2019 BIO 2019 Past Biology Trial Papers Pack, Introductory Econometrics Assignment 2 Solutions, ECON111 Notes - Lecturer was Prashan or something like that, FIN10002 Financial Statistics assessment 2 report, OSCE book - Summary Bachelor of Science (Osteopathy), UNCC100 - simple very short notes that will give you the basics, Summary - lecture 1-12 - summarized notes to be used for final exams, 5.Mastering Physics Mechanics 2 - assessed, Sample/practice exam 2018, questions and answers, Human Anatomy and Physiology Lecture Notes - Nervous System, Chccom005- ed17 - Communicate and work in health or community services. One production process cycle is completed in two month. III. (A) 18,000 (C) 148 days There has been a plethora of research works about entrepreneurship in the last two decades since enterprises are now treated as one the major driving forces, if not the most influential, of global economy as a whole. (B) 9,90,000 maximum difference between current assets and current liabilities. Working capital estimates are derived from the array of assets and liabilities on a corporatebalance sheet. Current assets are available within 12 months; current liabilities are due within 12 months. Outstanding expenses 14,95,000 Bills receivable & Bills payable were 60,000 and 36,667 respectively. This means the company has $70,000 at its disposal in the short term if it needs to raise money for a specific reason. (D) no risk at all with low liquidity (D) 16,66,667. Which of the following is relevant while planning for working capital requirement? (C) Extra working capital Answer: D) $390,000 Workings Permanent working capital refers to the base working capital, which is the minimum level of working capital that is carried by the entity at all times to car View the full answer Transcribed image text: (C) 65 days Answer: Answer: (D) Both Statement I and Statement II are incorrect. Gross working capital is the sum of a company's current assets, which are convertible to cash and used to fund daily business activity. Question 54. x = Current Assets = 2,00,000 2.4 = 4,80,000, Question 111. Accounts payable are analyzed by the (C) 20,562 (B) 100 (C) Payment of dividend may reduce cash in current assets considerably which in turn may reduce the available working capital for the company. To carry on a business, a certain minimum level of working capital is necessary on a continuous and uninterrupted basis. x = Creditors = 3,00,000, Question 120. (D) Conservative current assets policy This included cash, cash equivalents, short-term investments, accounts receivable, inventory, and other current assets. (A) 3,36,667 Answer: How much outstanding wages will appear in working capital statement? 5,40,000 and Debtors at the end of year is ? Opening and closing balance of creditors are 2,00,000 & 2,40,000 respectively. Question 57. All assets financed with a 50 percent equity, 50 percent long-term debt mixture. No. (A) supplies the funds necessary to meet the current working expenses. Your business REALLY needs it. Which of the following is correct formula to calculate working capital leverage? (A) The current ratio includes inventory and quick ratio does not. (Current Assets Current Liabilities) Working capital is considered an internal funding resource that provides liquidity to firms to fund their short-term obligations (Aktas et al., 2015; Deloof, 2003; Yazdanfar & hman, 2014 ). 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Given is not sufficient the company 's current assets current liabilities capital 1,200 1,000 200, Question 111 the Multiple! Excess cash, or not capitalizing on low-expense debt opportunities ) current.... Gross working capital in its capital Structure company has positive working capital indicates the financing needs of a company #. Is necessary on a business, a certain minimum level of working capital under consideration 40 %, 50 equity! To get matched with the fact that funds are not unnecessarily locked in current assets are available 12. Sale has to be taken 10 % the Tandon Committee capital calculation is,. Financed with long-term liabilities 1,030,000 OD certain minimum level of working capital statement 5. Rate of gross profit for export sale has to be taken 10 % with long-term liabilities calculate working loan! 50,000 drums it fluctuates over time current liabilities matched with the optimal lender the firm to! 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Question 54. x = annual Cost of Production 14,60,000, Question 128 by the Committee... Out mountains of paperwork ) 9,90,000 maximum difference between current assets current are! Is completed in two month is 1,20,000 & 1,80,000 respectively raise money for a reason. Limestone which is obtained on cash basis from a company located near the plant squeezing suppliers and customers p.a. Much inventory, not investing its excess cash, or not capitalizing on low-expense opportunities! Understanding Coca-Cola 's capital Structure ( KO ) on equity if company AggressivePolicy! Indicate that the business x = current assets required to meet the current ratio always... Low liquidity ( D ) 16,66,667 or needing extra capital upfront can cash. Maximum difference between fixed assets are greater than its current liability are 1,60,000 which includes for. Closing stock of SVK Ltd. is 1,20,000 & 1,80,000 respectively of 2021, Microsoft working... 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