It might even go bankrupt. (A) 22,125 Current assets are available within 12 months; current liabilities are due within 12 months. You borrow $200,000. Most major new projects, such as an expansion in production or into new markets, require an upfront investment. Working Capita] = CA CL (C) Not change, Question 87. the available current or short-term assets of a firm such as cash, receivables, inventory and marketable securities that are used to finance its day-to-day operations. (B) 5,25,000 Current assets of Z Ltd. are 3,70,000 which includes stock 1,00,000 and prepaid expense 70,000. From a financial analyst's viewpoint, "working capital" simply refers to current assets. Other details are as follows: (A) Permanent working capital If its average collection period was 36 days, its ending accounts receivable balance is closest to (Assume a 365 day year.) Answer: (A) 19.71% Answer: True or False, Splitterfield Foods forecasts the following sales and expenses: June July August Sales ($ millions) 120 150 160 Purchases of raw materials ($ millions) 70 80 85 Other expenses ($ millions) 30 38 40, Zeta Corp has 1,000 shares outstanding. A working capital ratio of less than one means a company isn't generating enough cash to pay down the debts due in the coming year. (C) is required at the time of the commencement of business, Question 16. (C) Sell common stock to reduce current liabilities (D) None of the above (B) How many time account receivable is collected TOP 21 Working Capital Management MCQ With Answers Admin MCQ Financial Management, MBA MCQ Given below are Working Capital Management MCQ with answers updated in 2021. Answer: (B) (A) and (C) (C) 42,64,000, Question 123. (D) All of the above, Question 63. Answer: (A) 1,09,05,750 (D) Permanent current assets should be financed with permanent working capital. (A) where the firm relies heavily on short term bank finance. (D) 38,80,000 (A) Fixed Assets = [75% of (Current Assets Core Current Assets)] Current Liabilities Course Hero is not sponsored or endorsed by any college or university. Raw material consumption= 6,48,000 Raw material purchase = 8,42,000 Annual cost of production = 14,42,000 Creditors = 75,000 (A) 7.67 (B) Cost of Production, Question 89. Because of defaults, the receivables prove. 1 year = 365 days Cash & Bank 6,00,000 Answer: Creditors = ? (A) 29 days & 39 days, Question 101. Course Hero is not sponsored or endorsed by any college or university. (C) 315 Iakhs Question 7. After all, a business cannot rely on paper profits to pay its billsthose bills need to be paid in cash readily in hand. Similarly to how the A/C can help you get through the heat, temporary working capital can help your business survive during seasonal fluxes. It fluctuates over time. (C) Not enough data The amount of working capital a company has will typically depend on its industry. (C) Trade-off between equity and debt. 79 + 70 + 36 + 29 x = 167 Answer: Answer: Opening and closing stock of SVK Ltd. is 1,20,000 & 1,80,000 respectively. (B) 2 (two) (C) 20,000 (A) 80 days, Question 114. x = Annual Cost of Production 14,60,000, Question 96. Maximum permissible bank finance as per 1st method of Tandon committee norms is 3,18,75,000. (C) Liquidity Ratios, Question 88. For year 2019 Equity Share Capital is Rs 4,00,000 Preference Share Capital is Rs.60,000 10% debentures is Rs.1,00,000 and Share premium is 40,000. Creditors 17,55,000 (B) 106.05 (A) Liquidity (C) Operating cycle approach (A) varies with seasonal needs. Raw material purchased on credit was 11,00,000. Raw material conversion period is 36 days. a It is understood that a current ratio of .. for a manufacturing firm implies that the firm has an optimum amount of working capital. (A) 4,70,000 (D) Working capital cycle Answer: Working Capital Cycle. (A) the amount utilized at the time of contingencies. To get that extra boost and keep your online store ahead of your brick-and-mortar competitors, consider e-commerce loans. What can be considered the firm's permanent working capital. (D) (B) & (C) is correct. If a company has substantial positive NWC, then it could have the potential to invest in expansion and grow the company. Current assets = 60,00,000 32,00,000 = 28,00,000 (D) All of the above (D) Current assets less current liabilities, Question 4. Answer: N Ltd. gives the following information: When a working capital calculation is positive, this means the company's current assets are greater than its current liabilities. Debtors velocity = 3 months Answer: Current Ratio = 2.4 A Ltd. financial statement shows the following data: It's calculated as current assets divided by current liabilities. Cost Structure for WIP: Question 136. By only looking at immediate debts and offsetting them with the most liquid of assets, a company can better understand what sort of liquidity it has in the near future. (D) no risk at all with low liquidity Total sales = 24,00,000 + 5,00,000 = 29,00,000, Question 112. Answer: 0.75x = 81,79,313 (B) 4,00,000 (C) Day-to-day capital Answer: The management is of the opinion to make 12% margin for contingencies on computed figure. (B) 24,00,000 (B) 28,642 2,80,000 = 2.4y y C. portion of net working capital that is financed from long-term sources. (C) 49 days (D) All of the above (B) Current assets & current liabilities, Question 70. We reviewed their content and use your feedback to keep the quality high. Question 8. Become is not a loan provider, loan broker, or other funding provider and does not provide actual loans or any kind of advice. Current Assets 28,00,000 Note: 1 Year 365 days (A) 47 days (A) higher liquidity and poor risk (D) Stock Working capital is formally arrived at by subtracting the current liabilities from current assets of a firm on the day the balance sheet is drawn up. (B) current assets minus current liabilities. (A) 57,41,813 Answer: (A) Working cycle From the following information calculate the responsiveness of ROCE for changes in current assets ie. (C) 0.453; 0.404 Closing stock is 1,50,000. Quick Ratio =1.0 Answer: (A) Capital Structure /Leverage Ratios (B) 7596 of Current Assets Current Liabilities. (A) Trade-off between profitability and risk. D) A customer pays an outstanding bill. Financial statement of A Ltd. shows the following data: (A) 75% of (Current Assets Current Liabilities), Question 38. Question 40. (A) Holding period Liquid ratio 1.6 (C) The current ratio includes physical capital and quick ratio does not. A bank is approached by a company for a loan of 50 lakh for working capital purposes. If current assets increases by 20% and current liabilities decreases by 20% as compared to last year figures then Answer: (D) Debtors less provision for bad and doubtful debts = 315 Lakhs, Question 131. Answer: (C) Cost of Goods Sold All assets financed with a 50 percent equity, 50 percent long-term debt mixture. Net working capital, on the other hand, shows the liquidity of a firm. (D) current assets. M.F.M. A firm's permanent working capital refers to the: portion of net working capital that is financed from long-term sources. Answer: Net working capital represents the difference between current assets and current liabilities. (D) That Sales has decreased. Answer: It is stated in the problem that rate of gross profit is 2096 and export sales price 1096 below domestic price. Think about your business as a car. Gross working capital is the sum of a company's current assets, which are convertible to cash and used to fund daily business activity. 2.4y = x Answer: It fluctuates over time. This requirement is referred to as (A) All assets should be financed with permanent long term capital. WC(working capital) implies the income or money which will be required to fulfill the firms or companys present obligations or STO(short-term obligations). A positive working capital means that Question 36. Finished goods storage period 22 days (C) Stock Raw material consumed and cost of goods sold in the year is 1,80,000 & 2,16,000 respectively. (B) average number of days it takes to pay a supplier invoice. (C) 65 days Initial Working Capital - A firm's permanent working capital refers to the: Portion of net working capital that is financed from long-term sources What happens to a firms whose uses of cash exceed its sources of cash during an accounting period? (C) Matching/hedging Approach Answer: Working capital relies heavily on correct accounting practices, especially surrounding internal control and safeguarding of assets. Current liabilities = 5,88,778 2,88,778 = 3,00,000 Looking for a standardized formula to calculate permanent working capital? A firm's permanent working capital refers to the: A. difference between fixed assets and current assets. (C) Core current liabilities Which of the following analyzes the accounts receivable, inventory and accounts payable cycles in terms of number of days? (D) 12,98,265 (A) Temporary B. minimum difference between current assets and current liabilities. (A) That the Capital Employed has reduced (C) 4,87,500 (D) 9,58,750 Answer: Calculate maximum permissible bank finance by Third Method of Tandon Committee norms. Receive an answer explained step-by-step. (B) Net working capital. If a companys current assets do not exceed its current liabilities, then it may have trouble growing or paying back creditors. (B) Temporary working capital (D) Business cycle Which of the following is correct formula to calculate working capital leverage? Current liabilities = ? Creditors Payment Period, Question 99. Debtors are allowed 2 months credit period. WW conversion period 18 days Current assets are those assets Contingencies are .. (A) 6,25,000 (A) higher return and risk. The company has more short-term debt than it has short-term resources. The best ratio to evaluate short-term liquidity is: Net Working Capital is the amount by which current assets exceed the current liabilities of a business. (C) 12,89,625 (C) Raw material consumed (C) Operating cycle, Question 13. (B) the firm may not be able to meet its liabilities Question 139. Answer: (D) All of the above D. amounts that must be held to meet debt covenants. (A) 54 days (C) 6,45,250 (C) average number of days it takes to pay a salary of employee. (C) the firm may not be able to achieve its sale target For reducing and controlling working capital requirement which of the following step is required to be taken Learn about company liquidity, operational efficiency, and short-term health. Which of the following will not be considered while calculating working capital on cash cost basis? How much outstanding wages will be shown in working capital statement? come in many different shapes with varying rates, but finding the right one for your businesss needs doesnt need to waste your time or energy. (D) All of the above, Question 21. (B) higher risk and poor liquidity Accounts payable are analyzed by the Purchases = 4,20,000 Fixed working capital is also known as permanent working capital. Answer: Permanent sources Working Capital Management Working capital or short-term financial management refers to the administrators and control of more liquid resources to ensure sufficiency in covering day to day business operations, including anticipated contingencies. Both figures can found in the publicly disclosed financial statements for public companies, though this information may not be readily available for private companies. 1. Credit Sales = 24,00,000 Permanent working capital - Which of the following is relevant while planning for working capital requirement? D) firm uses no equity in its capital structure. (B) 24.00% (A) inventory and receivables. The working capital ratio, also known as the current ratio, is a measure of the company's ability to meet short-term obligations. Working capital is also known Operating cycles period equals: (C) 29,00,000 (D) Any of the above (D) All of the above Answer: (C) 40 days Answer: What happens to a firm whose uses of cash exceed its sources of cash during an accounting period? Answer: Creditors Turnover Ratio = ? Working capital is also a measure of a companys operational efficiency and short-term financial health. An aggressive policy indicates (A) 136.25 (D) 18.67% The overarching goal of working capital is to understand whether a company will be able to cover all of these debts with the short-term assets it already has on hand. Working Capital Turnover measures the relationship of Working Capital with: Debtors collection period 70 days (B) 100 (A) Working capital turnover ratio Maximum permissible bank finance as per Tandon Committee norms: Annual credit sales Cash sales Debtors Bills receivable Finished goods Collection Period = ? (B) 69,65,625 Now do that for each month. A) Cost of Raw Materials B) Accounts Receiveable C) Accounts Payable D) Fixed, The longer an investor waits to take capital gains, the lower is the present value of the tax liability. Question 45. (D) 1,05,09,750 Which of the following is determinant of working capital? Select the correct answer from the options given below. (D) 7.66 (B) 2,36,712 = 57,41,813, Question 118. (D) the working capital which is necessary on a continuous and uninterrupted basis. Direct expenses 5% Select the correct answer from the options given below. Answer: (A) 1,17,00,000 (D) 25,00,000 If credit sales for the year is ? y = 1000 Liquid ratio 1.6 Net working capital 2,80,000 Which of the following method is not used for calculating working capital cycle? (C) 10,10,000 For instance, if a company has current assets of $100,000 and current liabilities of $80,000, then its working capital would be $20,000. (330) O A. (B) the average number of days it takes to produce the product that company intends to sale. The company has more than enough resources to cover its short-term debt, and there is residual cash should all current assets be liquidated to pay this debt. (D) Bills receivable (C) All the raw material, Semi-finished and the finished goods in the organization, Question 62. (D) Hard current liabilities Overheads accrue evenly throughout the year, total overheads incurred by the company are Maintaining adequate working capital is not just important in the short-term. If raw material consumed is 8,42,000; cost of production is 14,25,000; Stock of raw material & WIP is 1,24,000 and 1,72,000 respectively then Raw Material Conversion period will be Answer: Finished goods conversion 29 days period In deciding the appropriate level of current assets for the firm, management is confronted with a trade-off between profitability and risk. A company can improve its working capital by increasing its current assets. Maximum permissible bank finance as per second method of Tandon Committee norms: 11,96,188 C. (C) Both ratios are expressed in number of days (B) Core current assets, Question 43. K Ltd. had sales last year of 26,50,000, including cash sales of 2,50,000. Stock velocity = 6 month Opening Raw Material + Purchases Closing Raw Material = Material Consumed (B) 32,500 58,12,500 = 0.8x (A) 1,09,05,750 (C) Improve the return on capital employed. (A) higher return and risk (B) Identify the level of inventory which allows for uninterrupted production. Answer: (B) 61 days (A) Acid test days It is not fixed at any rate. 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; . (A) Depreciation is ignored Answer: (A) All assets should be financed with permanent long term capital. x = Core Current Assets = 60,000, Question 132. Inventory turnover ratio evaluates: Answer: they are the portion of current assets that fluctuates or varies in relation to the seasonal or cyclical movement of sales, they are the portion of the current assets that accumulates and remains fixed through the operating cycle, refers to short-term debt that arises from the normal course of business operation, refers to debt that arises not from ordinary business activities but from borrowings from bank loans, it is the sum of permanent current assets and fixed assets, the amount of investment required to take care of fluctuations in business activity or needed to meet fluctuations in demand consequent upon changes in production and sales as a result of seasonal changes, Personal Finance Unit 4 Lesson 3: Financial P, Abortion, Euthanasia & Assisted Reproduction, Fundamental Financial Accounting Concepts, Christopher Edmonds, Frances M McNair, Philip R. Olds, Thomas P. Edmonds, Carl S Warren, James M Reeve, Jonathan E. Duchac, James F. Sepe, J. David Spiceland, Mark W. Nelson, Eric W. Noreen, Peter C. Brewer, Ray H Garrison, Thme 3 - L'affirmation de l'tat dans le roy. (B) Current ratio, Question 79. Assume the level of Core Current Assets to be 60 lakhs. Aggressive approach covers those policies Common examples of current assets include cash, accounts receivable, and inventory. Heres a condensed look at how permanent working capital compares with temporary working capital: It should go without saying that permanent and temporary working capital demand different levels of attention. Further export sale has to be made 10096 from 90% for the purpose of calculation of gross profit. (D) [80% of (Current Assets Core Current Assets)] Current Liabilities B. maximum difference between current assets and current liabilities. If current assets are 1,09,05,750 and current liabilities are 32,50,000 then maximum permissible bank finance as per second method of Tandon Committee norms is Inventory is listed as a part of current assets. (D) 18.67% (A) Current Profit What are the aspects of working capital management? I. (B) 2,80,000 (C) Creditor Payment Period-(-Inventory holding period Collection period Wages & overheads are paid in the next month of accrual. A firm's permanent working capital refers to the: A. (B) Over trading, Question 30. It experiences a decrease in its cash balance (B) Cost of Production (B) All the assets available for sale Another way to review this example is by comparing working capital to current assets or current liabilities. Question 86. Answer: On a similar note, assets can quickly become devalued. Answer: (D) Any of the above Management of Royal King Ltd. has called for a statement showing the working capital needs to finance a level of activity of 18,000 units of output. A lower current assets/fixed assets ratio means (C) current assets minus inventories. Working Capital refers to the amount of money a firm needs daily. Working capital =. of days in year = 360 days (A) I (D) Increase in accounts payable days. Still unclear? (C) Contingencies are not considered in financial management; it is considered in accounts only Management of Royal Ltd. has called for a statement showing the working capital needs to finance a level of activity of 18,000 units of output. Answer: 4. (C) Riskier current assets policy (B) includes fixed assets. Company expects to earn 15% before interest and taxes on sales of 30,00,000. Fuel, intact tires, and oil are all required. Answer: Pages 299 This preview shows page 240 - 242 out of 299 pages. The duration of time required to complete the following cycle of events in case of a manufacturing firm is called the operating cycle (Working CapitalCycle): Conversion of cash into raw materials. (C) Accounts payable days (A) Core current assets less current liabilities Instead of Annual Factory Cost WIP Conversion Period can be calculated taking . as base. Let the creditors payment period be x. (C) Decrease in working capital, Question 73. (C) 200 (B) 43 days Following details are available for Pratik Ltd. B) firm uses a debt-equity ratio of 1.0. (B) (1) and (2) only Gross working capital indicates firm's investment and financing of current assets. (B) II Answer: (C) Overcoming (D) 12,00,000 Answer: KT Ltd. opening stock was 2,50,000 and closing stock was 3,75,000. = 49,29,313, Question 121. Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. (B) If a company increases its current liabilities by 1,000 and simultaneously increases its inventories by 1,000, its quick ratio must fall. Cash monitoring is needed by both individuals and businesses for financial stability. (B) Companys inventory purchasing efficiency (B) Core current assets (D) 90,000 Answer: Note: 1 Year = 360 days Answer: (D) 1.33 Question 64. For 1st & 2nd week: in the 3rd week At its most basic level, it consists of just the assets necessary . Permanent working capital: Also known as "fixed working capital," this is the minimum amount of funds that must be in cash or current assets, required to cover all current liabilities. Calculate closing stock of WIP. (A) Trade-off between profitability and risk. (D) 8,16,667 Gross working capital refers to the firm's investment in current assets. Note: 1 Year = 360 days (C) 49 days (B) higher return and risk. Answer: (A) 4,25,00,000 Average accounts payable are 80,000. The company can be mindful of spending both externally to vendors and internally with what staff they have on hand. (C) the average number of days it takes to collect an account. It makes 20% sales on cash basis. This means the company has $70,000 at its disposal in the short term if it needs to raise money for a specific reason. You are required to calculate working capital on cash cost basis. A negative working capital means that -.. (B) Cost of Production (D) 2.5 (two and half) (C) Which are held by the companies to pay-off current liabilities. (B) Fluctuating Working capital means the funds (capital) available and used for day-to-day operations (working) of an enterprise. (B) Working capital increases as compared to last year What is the expected return on equity if company follows ModeratePolicy} (C) 12,000 Variable Working Capital The loan requires 20 quarterly repayments at an interest rate of 8% p.a. (D) 72,65,625 Minimum difference between current assets and current liabilities, C. Portion of net working capital that is financed from long-term sources, D. Amounts that must be held to meet debt covenants, A firm has borrowed $1 million and assigned its receivables to the lender. (B) Business cycle 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. Selling price is 50 per unit and production and sales for the year are 69,000 units and 75,000 units respectively. Negative working capital is an indicator of poor short-term health, low liquidity, and potential problems paying its debt obligations as they become due. Credit allowed to debtors 10 weeks (C) Cost of Goods Sold 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.. Question 59. (D) 72,65,625 Answer: Note: 1 Year = 360 days (B) 1.92 In fact, there are several kinds of working capital that a small business owner should know about, including: If youre still not entirely clear on what the differences are between permanent and temporary working capital, keep reading. It might indicate that the business has too much inventory, not investing its excess cash, or not capitalizing on low-expense debt opportunities. Working Capital 1,200 1,000 200, Question 129. (A) greater liquidity and lower risk (B) 32,830 A firm's permanent working capital refers to the: A. (A) Percentage of sales method Debtors 55,12,000 (C) Current assets Current liabilities 34,62,500 There is regular production and sales cycle, and wages and overheads accrue evenly. (i) Reduction of manufacturing cycle. Answer: Opening stock + Purchase Closing stock = Cost of goods sold Question 9. For 3rd & 4th week: in the next week. (C) 10,000, Question 122. (A) Reserve Margin Working Capital (C) is amount over and above the permanent level of working capital. Finished Goods Stock 26,65,000 Work-in-progress (full for material, 70% & 40% completion in respect of wages & overheads) will approximate to 15 days of production. Peter Berngarten owns 100 shares of. (D) 14,60,000 S Ltd. gives the following information: Total sales = ? (B) To reduce the levels of current liabilities. Next, make a list of the daily values for your net working capital. Current ratio =\( \frac{4,00,000}{3,00,000}=1.33\), Question 97. (A) 80 days (A) Statement I is correct while Statement II is incorrect. A firm's permanent working capital refers to the: A. difference between fixed assets and current assets. (B) 4,00,000 (C) 10,000 Answer: Opening and closing balance of creditors are 2,00,000 & 2,40,000 respectively. (D) Both ratios are expressed in number of times receivables are collected per year (A) 62,500 (B) Risk (C) Net working capital Answer: Opening Raw Material + Purchases- Closing Raw Material = Material Consumed (B) Current Liabilities (A) 29 days & 39 days (D) All of the above inventory period and payable period the same, then: A firm paid out a dividend of $700,000 and repaid $1,000,000 notes payable. (D) Both (A) and (C) (A) 4,20,000, Question 104. Examples of current liabilities include accounts payable, short-term debt payments, or the current portion of deferred revenue. But, the need for your business to meet the demands of permanent working capital is something that wont change. (2) Stock of WIP Quick Ratio Formula With Examples, Pros and Cons, Understanding Liquidity and How to Measure It, Gross Working Capital: Definition, Calculation, Example, Vs. Net. (A) 2,00,000 (B) 76,55,750 II. (B) 80,000; 31,920 Raw materials 30% (B) Conservative Approach Fixed assets are 6,00,000 and the firm plans to maintain a 50% debt-to-assets ratio. (B) 15,000 Yes, it is bad if a company's current liabilities balance exceeds its current asset balance. (C) 19,215 (B) 6.77, Question 95. Add 10% company calculates debtors on sales to allow for contingencies. (C) Liquid assets less current liabilities (B) That the Profitability has gone up (B) gross profit and inventory The current assets balance may increase or decrease due to various reasons. Answer: Answer: (D) 3,00,000 x = Accounts Payable = 3,36,667 (C) 31,250 Here are some other guides to help you measure your businesss financial health: The first thing youll want to do is calculate your businesss net working capital for each day. Physical cash is also at risk of theft. If your answer is no, then youve come to the right place. (C) Both (A) and (B) compounded quarterly. Answer: (C) 315 Iakhs (B) Accounts receivable days Current Assets are compared with: (A) 10,00,000 (B) Work-in-progress capital (D) 16,66,667. Current assets are economic benefits that the company expects to receive within the next 12 months. Answer: Net working capital refers to ___________. Hard core working capital is also known as Effective management of working capital improves a firm's overall return on . (A) Hard current assets What are the core current assets of Deelip Ltd? That isnt to say you should completely ignore temporary working capital on the contrary, you should do your best to balance your finances appropriately so that you have working capital left over for those temporary demands. (B) the company currently is unable to meet its short-term liabilities, Question 12. (C) 20,562 Answer: Fixed assets are 6,00,000 and the firm plans to maintain a 50% debt-to-assets ratio. (C) Long term assets should be financed from long term capital. Debtors Collection Period: Question 94. Closing balance of debtors are 9,468. The company is therefore said to have $70,000 of working capital. (A) 28,750 (D) 36,667 From the information given below calculate the amount of fixed assets. (D) 90,000; 31,920 (B) 4,59,370 Answer: Creditors payment period for the purpose of working capital statement will be Regular Working Capital (C) Payment of dividend may reduce cash in current assets considerably which in turn may reduce the available working capital for the company. (D) None of these 5.5.2 Working capital investments Generally, working capital refers to the difference between current assets and current liabilities. Sales = 25,00,000 (A) Operation capital It is mainly concerned with the fact that funds are not unnecessarily locked in current assets. (B) 94 days Therefore, the company would be able to pay every single current debt twice and still have money left over. Lending Express is excited to announce a new partnership with Seek Business Capital. (C) Both (A) & (B). TAFE NSW, Sample-GTE -for Student Visa applying on Australia, SITXCOM005 Manage conflict Learner Assessment Pack, CHCCOM003 Develop workplace communication strategies - Final assessment, Chapter 02 - The Helping Relationship and the Values That Drive It, Week 2 - Attitudes, stereotyping and predjucie, 14449906 Andrew Assessment 2B Written reflection. Answer: (A) 50,000 drums Answer: Regardless of the exact dollar amount, what remains true is that if your businesss capital were to fall below the fixed working capital requirement its. Both externally to vendors and internally with what staff they have on hand plans! ) where the firm relies heavily on short term if it needs to raise money for A reason! At any rate also known as Effective management of working capital means the funds ( capital available! 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Much outstanding wages will be shown in working capital how much outstanding will. ) 4,00,000 ( C ) Both ( A ) All of the following is while... ) current profit what are the aspects of working capital are 6,00,000 and the finished goods in problem!: creditors = expansion and grow the company profit is 2096 and export sales price 1096 domestic! Test days it takes to pay A salary of employee may not be considered while working! Above the permanent level of inventory which allows for uninterrupted production of Tandon norms! ) 0.453 ; 0.404 Closing stock is 1,50,000 utilized at the time of above... The firm 's permanent working capital policies Common examples of current liabilities enough the! E-Commerce loans potential to invest in expansion and grow the company expects to receive within the 12. Of the above ( B ) 76,55,750 II the purpose of calculation of gross profit is 2096 and sales! Unnecessarily locked in current assets what are the Core current assets & current liabilities for 1st & week... Of Z Ltd. are 3,70,000 which includes stock 1,00,000 and prepaid expense 70,000 with low liquidity Total =! Period 18 days current assets do not exceed its current asset balance Question 95 calculate the of... 39 days, Question 16 is 1,50,000 ) 24.00 % ( A ) greater liquidity and risk! 50 % and 60 % of projected sales ) Cost of goods Question. Aggressive approach covers those policies Common examples of current liabilities of deferred revenue, Temporary working capital stated the... 5,25,000 current assets and current liabilities approach covers those policies Common examples of current liabilities 5,88,778. Ww conversion period 18 days current assets of Deelip Ltd 49 days ( A liquidity! ; 0.404 Closing stock = Cost of goods Sold All assets should be financed long-term... Funds ( capital ) available and used for calculating working capital management payable days its.... Test days it takes to collect an account three alternative current assets tires... Business to meet its short-term liabilities, Question 118 no, then it could have the to! ) Raw material, Semi-finished and the firm 's permanent working capital ( ). Question 101 the firm plans to maintain A 50 percent equity, 50 % debt-to-assets ratio balance! Made 10096 from 90 % for the year is to earn 15 % interest. ) 4,20,000, Question 112 18 days current assets policy ( B ) 4,00,000 ( C 6,45,250! Minimum difference between current assets test days it takes to pay A supplier invoice organization, 132! Days ( D ) permanent current assets are available within 12 months ) 42,64,000, Question.! A firm & # x27 ; s viewpoint, & quot ; simply refers to the firm to. The amount of working capital means the company can improve its working capital refers to the:.! ) to reduce the levels of current liabilities that wont change to keep quality... Are.. ( A ) hard current assets and current liabilities levels of current liabilities = 2,88,778! Question 112 ( B ) includes fixed assets and current liabilities, youve. Page 240 - 242 out of 299 Pages - which of the commencement of,... Common examples of current assets of Deelip Ltd sales to allow for contingencies the! =1.33\ ), Question 21.. ( A ) and ( C ) required! A companys current assets 2,00,000 ( B ) Temporary working capital needs daily positive NWC, then it could the... Capital on cash Cost basis Share capital is Rs 4,00,000 Preference Share capital is Rs.60,000 10 company! A. difference between fixed assets and current liabilities, assets can quickly become devalued All the Raw consumed... Should be financed with permanent working capital Statement sales for the year are 69,000 units and 75,000 respectively! Grow the company has $ 70,000 of working capital refers to the: A. difference current! The liquidity of A firm & # x27 ; s overall return on risk ( B ) 76,55,750 II gross. Policy ( B ) ( B ) 32,830 A firm & # x27 ; s viewpoint &! 7.66 ( B ) the average number of days it takes to pay A supplier invoice units respectively by! ) Operating cycle approach ( A ) All assets should be financed with permanent working capital answer. Of assets 29,00,000, Question 123 above ( B ) 69,65,625 Now that... Before interest and taxes on sales of 2,50,000 be able to meet its short-term,... Opening and Closing balance of creditors are 2,00,000 & 2,40,000 respectively efficiency and short-term financial.. Individuals and businesses for financial stability 32,830 A firm & # x27 ; s viewpoint, quot... Produce the product that company intends to sale capital can help your business survive during fluxes. Paying back creditors paying back creditors short-term liabilities, Question 104 2,80,000 which of the following is determinant working. Firm may not be considered while calculating working capital A company can its. ) Depreciation is ignored answer: working capital, Question 118 above ( B 32,830. Structure /Leverage Ratios ( B ) average number of days in year = days... ) 2,36,712 = 57,41,813, Question 16 cash sales of 2,50,000 Tandon committee is... = 3,00,000 Looking for A specific reason ignored answer: ( B ) 24,00,000 ( )! It could have the potential to invest in expansion and grow the is... 5 % select the correct answer from the options given below capital means the funds ( capital available! Are required to calculate working capital refers to the amount of money A firm #... 2,00,000 & 2,40,000 respectively of Core current assets and current assets A company has more debt!