An aggressive policy produces Current Assets ? (C) Current assets capital Conversion of work in a process into finished goods. (B) (ii) & (iii) (A) 18,000 $390,000. A lower current assets/fixed assets ratio means (C) Day-to-day capital (A) All assets should be financed with permanent long term capital. Current assets are those assets B) The firm receives $10 million from an insurance company to compensate for flood damage earlier that month. Fixed assets are 6,00,000 and the firm plans to maintain a 50% debt-to-assets ratio. What is difference between current ratio and quick ratio? Sales = 25,00,000 Which of the following method is not used for calculating working capital cycle? Answer: Working capital is a measure of a companys liquidity and short-term financial health. = 75% (20,93,250 3,73,750) Last, working capital assumes all debt obligations are known. Because of defaults, the receivables prove. Alternatively, it could mean a company is failing to take advantage of low-interest or no-interest loans; instead of borrowing money at low cost of capital, the company is burning its own resources. (A) That the Capital Employed has reduced (D) an example of the hedging approach to financing. (A) average number of days it takes to pay a supplier fixed assets. (A) 22,125 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. (C) Stock Current Ratio = 2.4 (2) Manufacturing cycle (D) Fluctuating Working Capital, Question 25. A firm's permanent working capital refers to the: A. difference between current assets and current liabilities. (C) an example of high risk high (potential) profitability asset financing. From the following information calculate the net working capital: refers to the length of time allowed by a firm for its customers to make payment for their purchases. (C) Current assets (A) 50,000 drums Current liabilities = 5,88,778 2,88,778 = 3,00,000 (A) 76,75,550 You can learn more about the standards we follow in producing accurate, unbiased content in our. (A) 28,750, Tamilnadu Board Class 10 English Solutions, Tamilnadu Board Class 9 Science Solutions, Tamilnadu Board Class 9 Social Science Solutions, Tamilnadu Board Class 9 English Solutions, CS Executive Financial and Strategic Management MCQ, A Triumph of Surgery Extra Questions and Answers Class 10 English Footprints Without Feet, Notice Writing Class 11 Format, Examples, Topics, Exercises, Electricity Class 10 Extra Questions with Answers Science Chapter 12, A Roadside Stand Poem Summary line by line explanation in English by Robert Frost, Courses after BA | After BA What I Can do? Total sales = ? (4) Production policy Fixed assets 32,00,000 Working Capital 1,200 1,000 200, Question 129. Say a company has accumulated $1 million in cash due to its previous years retained earnings. (D) lower risk with lower liquidity equivalent to borrowing at an annual interest rate of: Annual Interest Rate = 1 / (0.99) ^ 52 = 68.6%. With the power of technology, Become is revolutionizing the business lending process, making it faster and easier than ever to get matched with the optimal lender. Therefore, at the end of 2021, Microsoft's working capital metric was $96.7 billion. (A) Borrow short term to finance additional fixed assets. Current assets = 60,00,000 32,00,000 = 28,00,000 (B) How many time account receivable is collected (B) average number of days it takes to pay a supplier invoice. (B) 19,250 Answer: Outstanding expenses 1,40,000 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. (A) 57,41,813 (B) 12,500 Working capital management is a strategy that requires monitoring a company's current assets and liabilities to ensure its efficient operation. It fluctuates over time. (C) 10,10,000 (3) Credit policy (C) Making greater use of short term finance and minimizing net short term asset. (C) 28,426 (C) Cost of Goods Sold The amount of current liabilities . (C) 3.68 Work-in-progress (full for material, 70% & 40% completion in respect of wages & overheads) will approximate to 15 days of production. 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. (C) 16.50% Company expects to earn 15% before interest and taxes on sales of 30,00,000. What will be the amount of maximum permissible bank finance as per first method of Tandon Committee Norms? (D) represents the amount utilized at the time of contingencies. B. minimum difference between current assets and current liabilities. Answer: Purchases = 4,20,000 Working Capital Management Explained: How It Works, Current Ratio Explained With Formula and Examples. From the following information calculate the responsiveness of ROCE for changes in current assets ie. Answer: However, there are some downsides to the calculation that make the metric sometimes misleading. Aggressive approach covers those policies How much raw material stock will appear in working capital statement? 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) Current asset cycle Common examples of current assets include cash, accounts receivable, and inventory. (D) Capital relating to main projects of the company (B) 23,40,000 (D) Trade-off between short-term versus long-term borrowing. (B) 50% of (Current Assets Current Liabilities) Tandon Committee Report on Working Capital relates to norms for . It might indicate that the business has too much inventory, not investing its excess cash, or not capitalizing on low-expense debt opportunities. Credit purchase = 4,20,000 50,000 = 3,70,000. (B) current assets minus current liabilities. Working capital relies heavily on correct accounting practices, especially surrounding internal control and safeguarding of assets. (A) Core current assets less current liabilities Wages are paid for 1st and 2nd week in the 3rd week & for 3rd and 4th week in the next week. 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. (A) the company is able to pay-off its long-term liabilities. Maximum permissible bank finance as per 1st method of Tandon committee norms is 3,18,75,000. A firm's permanent working capital refers to the: portion of net working capital that is financed from long-term sources. Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom. Side note: Permanent working capital for e-commerce businesses is generally lower than the permanent working capital needed to maintain an offline business. (B) The current ratio does not include inventory and quick ratio does. No. Answer: 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. x = Current Assets = 20,93,250 We reviewed their content and use your feedback to keep the quality high. Maximum permissible bank borrowing as per 3rd method of Tandon Committee norms: (C) 52,29,813 (B) 11,667 Answer: (C) Improve the return on capital employed. 5,40,000 and Debtors at the end of year is ? A conservative policy implies (A) 9,60,000 (A) 57,41,813 Your business REALLY needs it. For example, Microsoft's working capital of $96.7 billion is greater than its current liabilities. (C) 19 days (C) [75% of (Current Assets Core Current Assets)] Current Liabilities (A) 28,750 (B) Identify the level of inventory which allows for uninterrupted production. Answer: (D) All of the above except (4) (D) Bad debt balance at the year end (B) 80,000; 31,920 C. portion of net working capital that is financed from long-term sources. (C) Operating cycle approach (D) 5,20,000 ; Jager R. de; Koops Th. (A) the firm may not be able to its long term finance Maximum permissible bank finance as per Tandon Committee norms: M.F.M. Hard core working capital is also known as 0.75x = 81,79,313 ; Philippens H.M.M.G. (D) 20,625 Working Capital Cycle. In other words, it represents the current assets required on a continuing basis over an entire year . Number of drums = \(\frac{1,00,000 \text { tone }}{200 \mathrm{~kg} \text { i.e. } (A) 13.75 (D) 1,05,09,750 Answer: Expected production and sales are 48,000 units and 35,000 units respectively. (D) 2,40,721 (A) (1) only (D) [80% of (Current Assets Core Current Assets)] Current Liabilities (D) Fluctuating Working Capital A company can improve its working capital by increasing its current assets. Dont get it twisted, permanent working capital is something any/every successful business owner is aware of. (D) Current assets less current liabilities, Question 4. What Is Cash Management in Accounting and Why Is It Important? Getting your hands on the right type of working capital finance no longer requires you filling out mountains of paperwork! (B) 15,000, Question 107. Gross profit ratio = 20% Which of the following assets is not a quick current asset? Debtors + Bills Receivable = Account Receivable Sorry, we can't send you the article yet. Equity 5,67,500, Reserve & surplus 3,87,850, total debt 5,88,778 out of which 2,88,778 are long term debt, fixed assets are 11,44,128. 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(C) Credit sales. Learning Objective: 19-01 Show how long-term financing policy affects short-term financing requirements. (B) Cash sales Answer: (D) None of the above (B) Accounts receivable. Answer: (A) Differential working capital Calculate closing stock of WIP. (A) 4,25,00,000 Answer: Answer: (A) Current ratio (C) mode of overdraft, cash credit, public deposits etc. (B) There is a direct and proportional relationship 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. Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. Answer: Income tax payable 56,250 Working capital means the funds (capital) available and used for day-to-day operations (working) of an enterprise. Answer: Positive working capital indicates that a company can fund its current operations and invest in future activities and growth. (D) the company currently is able to meet its short-term liabilities WIP conversion period 36 days (A) 62,500 Creditors = ? This reduces immediate cash flow. A firm's permanent working capital refers to the: difference between fixed assets and current, maximum difference between current assets and current, portion of net working capital that is financed from long-term. (B) Over trading, Question 30. (C) Permanent Working Capital (B) 10,00,000 (D) 7.66 (B) 4,95,00,000 (C) 19,215 2. Total assets 60,00,000 (D) (1), (2), (3) and (4), Question 17. (D) Current assets less current liabilities (C) higher risk and higher liquidity Bills receivable & Bills payable were 60,000 and 36,667 respectively. 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. (A) greater liquidity and lower risk, Question 29. (A) the amount utilized at the time of contingencies. (A) 72 days (D) Data given is not sufficient It makes 20% sales on cash basis. Gross working capital refers to (D) Variable working capital (A) Depreciation, Question 75. [1 Year =360 days] (C) 2,63,127 Cash management (B) Making greater use of long term finance and minimizing net short term asset. (A) Fixed working capital Answer: Question 7. From the information given below calculate the amount of fixed assets. Debtors 55,12,000 Answer: (B) 39 days & 29 days Current assets & current liabilities of Deelip Ltd. are 9,60,000 and 3,60,000 respectively. (C) Extra working capital 3,15,000 = [75% of (Current Assets- Core Current Assets)] Current Liabilities Material consumed in income statement is shown at 3,60,000. (D) Overtone 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? (A) 54 days Liquid Ratio = ? Level of activity 1.56,000 units Working days in year are taken as 300 days for budget year. If a company has substantial positive NWC, then it could have the potential to invest in expansion and grow the company. To decide the structure of current assets. (B) 28,642 Answer: Answer: C. Debtors velocity = 3 months (D) 1,10,00,726 Which of the following is correct formula to calculate credit period availed? Working Capita] = CA CL Inventory turnover ratio evaluates: You borrow $200,000. That doesnt mean the competition between online and offline businesses is a certain win for e-commerce sellers though. It can be divided into two . Similarly to how the A/C can help you get through the heat, temporary working capital can help your business survive during seasonal fluxes. (D) 55,64,000 (B) 157 days 1. A company plans to manufacture and sell 400 units of domestic appliances per month at a price of 600 each. The CTC Ltd. is attempting to establish a current assets policy. Opening Raw Material + Purchases- Closing Raw Material = Material Consumed (B) Aggressive current assets policy, Question 33. Inventory balance will increase before the peak . (C) Operating cycle Answer: (D) Both (A) and (C) 3. (C) 16,33,333 Outstanding overheads appearing in balance sheet are 9,75,000. Finished Goods Stock 26,65,000 Working Capital Management CS Executive Financial and Strategic Management MCQQuestions with Answers you can quickly revise the concepts. (B) the company currently is unable to meet its short-term liabilities (D) 10,20,000 1 year = 360 days. Answer: What relationship exists between the average collection period and accounts receivable turnover? Raw material conversion period is 36 days. D. amounts that must be held to meet debt covenants. Current assets listed include cash, accounts receivable, inventory, and other assets that are expected to be liquidated or turned into cash in less than one year. (B) Cost of Production, Question 89. 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Sheet are 9,75,000 would be able to meet debt covenants article yet doesnt exist capital, Question.... Report on working capital, Question 29 than the permanent working capital, Question 25 cash due its! Bank finance as per 1st method of Tandon Committee norms and quick ratio debt obligations are.. ( 1 ), Question 4 of ROCE for changes in current assets Conversion... Before interest and taxes on sales of 30,00,000 heat, temporary working capital ( B ) aggressive current assets on.
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