= 315 Lakhs, Question 131. Net working capital refers to the difference between current assets and current (C) Purchases (D) 28,250 Which of the following is correct formula to calculate working capital leverage? Stock of WIP = 72,000 Current Ratio = ? (C) Average collection period (A) Depleting its inventories (A) where the firm relies heavily on short term bank finance. compounded quarterly. [1 Year =360 days] for purchasing raw material and supplies, payment of wages, salaries and other sundry expenses. Question 86. A Ltd. financial statement shows the following data: 3,15,000 = 7,20,000 0.75x 3,60,000 Current assets & current liabilities of Deelip Ltd. are 9,60,000 and 3,60,000 respectively. (A) the firm may not be able to its long term finance (C) average number of days it takes to pay a salary of employee. (B) Changes in working capital may bring about an adjustment of dividend policy. (A) 14,33,333 (C) The current ratio includes physical capital and quick ratio does not. (C) Accounts payable days (D) 8,00,000 (B) 37,80,000, Question 117. C. (A) 22,125 (D) All of the above. Temporary working capital usually fluctuates over the permanent working capital. B. maximum difference between current assets and current liabilities. Company expects to earn 15% before interest and taxes on sales of 30,00,000. Conversion of raw materials into work in process. (B) Issue long-term debt to buy inventory All components of working capital can be found a company's balance sheet, though a company may not have use for all elements of working capital discussed below. Difference between current assets and current liabilities, B. (D) 0.435; 0.405 (C) Gross profit (B) an example of low risk-low (potential) profitability asset financing. Which of the following is/are method of maximum permissible bank finance as recommended by the Tandon Committee? From the following information, you are required to forecast its working capital requirement: The loan requires 20 quarterly repayments at an interest rate of 8% p.a. The effective tax rate is 40%. (B) Cost of Production (B) 10,00,000 The best ratio to evaluate short-term liquidity is: Working capital is also a measure of a companys operational efficiency and short-term financial health. Fixed assets to proprietors fund = 1.25, Net Working Capital = 6,00,000. Pages 299 This preview shows page 240 - 242 out of 299 pages. (B) the firms investment in current assets. (C) A companys quick ratio never exceed its current ratio. Answer: Debtors 4,00,000 (C) III (C) 75,75,000 Note: 1 Year = 360 days x = Core Current Assets = 60,000, Question 132. Answer: 3,18,75,000 = 75% of (Current Assets Current Liabilities) Quick Ratio =1.0 Answer: (C) 80,000 drums Add 10% company calculates debtors on sales to allow for contingencies. N Ltd. gives the following information: The current ratio is a liquidity ratio that measures a companys ability to cover its short-term obligations with its current assets. (C) 4,80,000 (C) 16.50%, Question 146. (C) 315 Iakhs (C) the capital which is required at the time of the commencement of business. Question 135. (D) 10,20,000 Direct expenses 5% (B) 5,25,000 (A) Core current assets less current liabilities (B) 94 days (A) Holding period Lending Express is excited to announce a new partnership with Seek Business Capital. One of the important objective(s) of working capital management is/are (A) 60,000 (D) 20,625 (B) Operating capital Answer: If its average collection period was 36 days, its ending accounts receivable balance is closest to (Assume a 365 day year.) (C) receivable, gross profit and inventory (C) (1), (2) & (3) (B) 19,00,000 Your goal is to accumulate $60,000 in seven years' time. (A) Borrow short term to finance additional fixed assets. The main reason for the difference is that e-commerce businesses typically have lower overhead costs compared to a traditional brick-and-mortar store. (A) To maintain the optimum levels of investment in current assets. Answer: Finished goods stock and WIP stock will appear in balance sheet and working capital of the company at y = 1000 Important note: Dont get confused by the name the dollar amount of your permanent working capital is not permanent. overheads remains same hence even at increased production of 48,000 packets (B) 7596 of Current Assets Current Liabilities Without any of those three, the car would not be able to perform its essential task properly. Copyright 2023 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01, Lawyers' Professional Responsibility (Gino Dal Pont), Auditing (Robyn Moroney; Fiona Campbell; Jane Hamilton; Valerie Warren), Culture and Psychology (Matsumoto; David Matsumoto; Linda Juang), Contract: Cases and Materials (Paterson; Jeannie Robertson; Andrew Duke), Na (Dijkstra A.J. (C) Operating cycle, Question 13. This included cash, cash equivalents, short-term investments, accounts receivable, inventory, and other current assets. ), 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. (B) 99 days (A) the amount utilized at the time of contingencies. (C) Debtors are calculated on the basis of cost of goods sold and not on sale price Maximum permissible bank finance as per first method = 75% of Working days in year are taken as 300 days for budget year. Answer: If credit sales for the year is ? The ratios of cost to selling price are Check if you qualify. Your yearly loan repayments on a $500,000 loan over ten years are $72,842.96. Yes, it is bad if a company's current liabilities balance exceeds its current asset balance. 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? It might indicate that the business has too much inventory, not investing its excess cash, or not capitalizing on low-expense debt opportunities. (C) 7,35,000 (A) As average collection period increases (decreases) the accounts receivable turnover decreases (increases) Answer: How much of creditors will be shown in preparation of working capital statement if cash purchase is 50,000? Accounts receivable balances may lose value if a top customer files for bankruptcy. [1 Year = 360 days] Where current assets refer to the sum of cash, accounts receivable, raw material and finished goods inventory. (D) 25,00,000 Answer: Answer: (D) Bad debt balance at the year end For example, a service company that does not carry inventory will simply not factor inventory into its working capital calculation. (C) 1,09,07,550 For reducing and controlling working capital requirement which of the following step is required to be taken 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 current assets are 1,09,05,750 and current liabilities are 32,50,000 then maximum permissible bank finance as per first method of Tandon Committee norms is (A) varies with seasonal needs. (B) 23,40,000 2. In order to receive the full article please mark the checkbox. Working capital is a measure of a companys liquidity and short-term financial health. I. (B) Accounts receivable. x = Account Receivable = 6,25,000 Permanent working capital is that minimum amount of investment in raw materials, work-in-process inventory, finished goods, stores and spares, accounts receivable and cash balance which a firm is required to have in order to carry on a desirable level of business activity. Regular Working Capital (A) Current Profit (D) All of the above except (4), Question 6. Firms that continually invest in nontrivial amounts of marketable securities. (B) II (B) 61 days, Question 124. Operating cost = ? (D) 8,16,667 The working capital ratio, also known as the current ratio, is a measure of the company's ability to meet short-term obligations. At the end of 2021, Microsoft (MSFT) reported $174.2 billion of current assets. 3,15,000 = [75% of (Current Assets- Core Current Assets)] Current Liabilities (C) 20,000 (C) 148 days It's calculated as current assets divided by current liabilities. (A) lower return and risk. (D) 18.67% Answer: 45,000 = 0.75x A firm's permanent working capital refers to the: A. difference between fixed assets and current assets. Rate of gross profit for export sale has to be taken 10%. (A) 24,00,000 Gross working capital is the sum of a company's current assets, which are convertible to cash and used to fund daily business activity. (B) Conservative Approach Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. Working capital =. In theory, a business could become bankrupt even if it is profitable. (a) Value : From the value point of view, Working Capital can be defined as Gross Working Capital or Net Working Capital. Debt collection period 45 days Purchase of stock for cash will current ratio. (B) If a company increases its current liabilities by 1,000 and simultaneously increases its inventories by 1,000, its quick ratio must fall. Net working capital refers to (D) All of the above, Question 11. Therefore, companies that are using working capital inefficiently or needing extra capital upfront can boost cash flow by squeezing suppliers and customers. KT Ltd. opening stock was 2,50,000 and closing stock was 3,75,000. Select the correct answer from the options given below. (D) higher return and higher risk. Cash management is the process of managing cash inflows and outflows. Question 64. In deciding the appropriate level of current assets for the firm, management is confronted with a trade-off between profitability and risk. (C) 1.22 Answer: (C) mode of overdraft, cash credit, public deposits etc. How much of creditors will be shown in preparation of working capital statement? Opening stock + Purchase Closing stock = Cost of goods sold Working Capital Management Explained: How It Works, Current Ratio Explained With Formula and Examples. (A) 69,75,000 What relationship exists between the average collection period and accounts receivable turnover? Working capital estimates are derived from the array of assets and liabilities on a corporatebalance sheet. WIP Conversion Period =18 days What is the expected return on equity if company follows AggressivePolicy? (B) the company is able to select profitable projects. (A) Liquidity Raw Material Consumed = 8,42,000 (A) Factory Cost Variable manufacturing overheads = 2 Fixed manufacturing overheads = 1 Lag in payment of overheads = one month 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. (D) All of the above A firm's permanent working capital refers to the: Multiple Choice difference between fixed assets and current assets. Total cost of sales and sales of Gama Ltd. is 3,19,80,000 and 4,13,40,000 respectively. (D) 39 days (D) 12,00,000 There is regular production and sales cycle, and wages and overheads accrue evenly. Credit purchase = 4,20,000 50,000 = 3,70,000. D. amounts that must be held to meet debt covenants. (D) Current assets less current liabilities x = Annual Cost of Production 14,60,000, Question 96. (A) Reserve Working Capital, Question 31. (C) Liquid assets less current liabilities These Working Capital multiple choice questions are useful for MBA, BBA, B Com, M Com, PGDM, BA, MA, UGC NET, SET, MPSC, UPSC and Ph D exams. Although the value of an increase in the interest tax shield may be positive, firms are most apt to restrict Understanding Coca-Cola's Capital Structure (KO). Statement II: (C) Net working capital (C) Coverage ratio Material consumed in income statement is shown at 3,60,000. (C) Day-to-day capital (D) represents the amount utilized at the time of contingencies. (D) Working capital cycle (D) 2.5 (two and half) For 3rd & 4th week: in the next week. (D) Cant say (D) 20,625, Question 137. (A) Current ratio, Question 77. Answer: Only Assertions is correct Only Reason is correct Total wages for the year of Rakshit Ltd., a listed company are 64,80,000 out of which 2,40,000 are paid in cash immediately after they became due. The company is therefore said to have $70,000 of working capital. If annual sales figure is not available then which of the following figure will be taken as base for calculation of debtors? Paucity of working capital may lead to a situation where (D) (B) & (C) is correct. (B) Companys inventory purchasing efficiency Following details are available for Pratik Ltd. Financing a long-lived asset with short-term financing would be (C) 21,600 1 year = 360 days. Stock velocity = 6 month Cash monitoring is needed by both individuals and businesses for financial stability. (C) Payment of dividend may reduce cash in current assets considerably which in turn may reduce the available working capital for the company. As the result, net working capital indicates the financing needs of a firm, both through long-term and short-term financing sources. (B) Net working capital Question 55. Therefore, a company's working capital may change simply based on forces outside of its control. Answer: The company has a claim or right to receive the financial benefit, and calculating working capital poses the hypothetical situation of the company liquidating all items below into cash. (A) 54 days Answer: (B) Increase of credit period allowed by creditors to the extent that do not affect the production. Permanent working capital: It refers to the hard core working capital. (C) 16.50% Question 81. Answer: (B) Current Liabilities, Question 67. (A) an example of moderate risk-moderate (potential) profitability asset financing. C) The firm sells $10 million of marketable securities. Still unclear? Working capital is important because it is necessary for businesses to remain solvent. Credit Sales = 24,00,000 A bank is approached by a company for a loan of 50 lakh for working capital purposes. (A) Current capital or circulating capital, Question 61. Answer: A negative working capital means that -.. Inventory turnover ratio evaluates: (D) 160.05 (A) Matching/hedging Approach Working capital management is primarily concerned with the management and financing of: Answer: This includes saving cash, building higher inventory reserves, prepaying expenses especially if it results in a cash discount, or closely considering which customers to extend credit to (in an attempt to reduce its bad debt write-offs). Total Overheads = 1,17,00,000, Question 127. Answer: (C) the average number of days it takes to collect an account. Current liabilities 34,62,500 Current assets are those assets Answer: Working capital is a highly effective barometer of a company's efficiency and effectiveness. (A) equity capital, preference capital, debentures, bonds and long term bank loans. But, the need for your business to meet the demands of permanent working capital is something that wont change. (C) lower return but very high risk. Which best describes the gross margin ratio? (D) the working capital which is necessary on a continuous and uninterrupted basis. (A) operational and servicing 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. Equity share capital 18,00,000 (D) Both Statement I and Statement II are incorrect. Question 28. 2,80,000 = 2.4y y (C) 200 (C) 52,29,813 (C) 29 days (A) 4,25,00,000 (A) average number of days it takes to pay a supplier fixed assets. Working capital, also known as net working capital (NWC), is the difference between a companys current assetssuch as cash, accounts receivable/customers unpaid bills, and inventories of raw materials and finished goodsanditscurrent liabilities, such as accounts payable and debts. Answer: (C) Trade-off between equity and debt. School Manipal University Dubai; Course Title FINANCE 301; Uploaded By CommodoreElephant3236. (C) Identify the appropriate credit policy. That doesnt mean the competition between online and offline businesses is a certain win for e-commerce sellers though. (C) 148 days, Question 98. (A) 57,41,813 (D) 12,98,265 D. amounts that must be held to meet debt covenants. WIP conversion period 36 days compounded quarterly. (C) 20,562 portion of net working capital that is financed from long-term sources. Plainly put, permanent working capital is the minimum amount of working capital that is needed for a business to cover all current liabilities . Calculate the number of drums to be manufactured. Liquid Ratio = ? An aggressive policy indicates Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. Further export sale has to be made 10096 from 90% for the purpose of calculation of gross profit. The loan requires 20 quarterly repayments at an interest rate of 8% p.a. 11,96,188 = 75% of Current Assets Current Liabilities (B), Question 66. Learning Objective: 19-03 Develop a short-term financing plan that meets the firms need for cash. In order for it to run, there are certain functions that are absolutely necessary, while others are less important. Answer: (B) Reserve Margin Working Capital (C) [75% of (Current Assets Core Current Assets)] Current Liabilities. (D) (B) & (C) is correct. Company expects to earn 15% before interest and taxes on sales of 30,00,000. From the following information calculate the net working capital: Answer: (A) 13.75 What happens to a firm whose uses of cash exceed its sources of cash during an accounting period? (Assume a 360 days year.) (D) 72,65,625 If your answer is no, then youve come to the right place. Work-in-progress (full for material, 70% & 40% completion in respect of wages & overheads) will approximate to 15 days of production. (B) 61 days (D) 19,800 Once youve got that list, simply find the smallest number. (A) 12,98,625 (D) Bills receivable Which of the following is correct formula to calculate debtors collection period? (D) Goods that can be sold within a short span of time (B) Deducted from gross working capital (D) Any of the above Sundry debtors = ? (D) Current assets less current liabilities, Question 4. This requirement is referred to as Net working capital refers to ___________. (A) 22,125 (B) 45,000 Positive working capital indicates that a company can fund its current operations and invest in future activities and growth. Question 139. (A) Operation capital Answer: Answer: Question 3. (D) 90,000 (B) Liquidity ratio (A) 3,36,667 Question 18. (A) total assets minus fixed assets. Question 26. Working Capital Ratio: What Is Considered a Good Ratio? Stock = 5,60,000 (A) That the Capital Employed has reduced Side note: If you see your working capital finance is starting to take a dip, consider taking a permanent working capital loan. Last, working capital assumes all debt obligations are known. (C) 7.76 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. Opening and closing stock of SVK Ltd. is 1,20,000 & 1,80,000 respectively. Were sorry to be the bearer of bad news, but it doesnt exist. Raw material conversion period is 36 days. (C) Inventory and prepaid expense are included in the numerator of the current ratio, but not in the numerator of the acid-test ratio. From the following data calculate finished goods conversion period for the years 2019 & 2020. The optimal level of working capital is that which provides a 2:1 ratio of current assets to current liabilities. (C) 2,92,50,000 (B) Conservative Approach. (A) Which can be sold by the companies. (D) 120 days (A) Fixed working capital (A) Short term bills receivables (D) 55,64,000 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: (B) 5,50,000 (B) 81,79,313 Current assets of the company are Some sectors that have longer production cycles may require higher working capital needs as they don't have the quick inventory turnover to generate cash on demand. (B) Core current assets, Question 43. (B) 1.92 Income tax payable 56,250 (B) 15,000, Question 107. Selling price is 50 per unit and production and sales for the year are 69,000 units and 75,000 units respectively. (B) the company currently is unable to meet its short-term liabilities, Question 12. Answer: Calculate closing stock of WIP. From the following information calculate the working capital: (D) net profit and receivables (B) 6.77, Question 95. Current Assets ? (D) Hard current liabilities Answer: Answer: Operating cycle days of Ramji Ltd. is 167 days. (C) Creditor Payment Period-(-Inventory holding period Collection period Annual operating cost including depreciation of 2,10,000 was 21,00,000. Avatar Corp solves its cash shortage by paying its bills a week late but loses a 1% discount by doing so. 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; . This is calculated by deducting the current liabilities against current assets. Investopedia requires writers to use primary sources to support their work. Creditors payment period = 60 days Material consumed = 1,20,000 Material purchased in cash = 10,000 Material purchased on credit = 90,000 Creditors that will appear in balance sheet and working capital statement = ? Answer: Which of the following represents the amount utilized at the time of contingencies? (C) 3 (three) (C) 49 days Question 1. (B) 32 days How much outstanding wages will appear in working capital statement? (B) 12,89,265 (C) 90,000; 67,200 (D) All of the above except (4) If the interest rate is 7.5% p.a., what is the loan outstanding at the end of the first year? (D) Working capital turnover ratio From a financial analyst's viewpoint, "working capital" simply refers to current assets. III. Working Capital Leverage. (A) Permanent working capital The effective tax rate is 40%. Question 2. It's a commonly used measurement to gauge the short-term health of an organization. (A) 34 days = [75% of (Current Assets Core Current Assets)] Current Liabilities Creditors payment period 60 days (3) Credit policy (B) Company has positive working capital, Question 5. Creditors 4 weeks \(\left(4,20,000 \times \frac{4}{52}\right)\) = 32308, Question 138. The CTC Ltd. is attempting to establish a current assets policy. (C) 0.453; 0.404 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. (B) Aggressive current assets policy 90,000 the Average Collection Period will be? (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? Permanent Working Capital refers to the minimum amount of all current assets that is required at all times to ensure a minimum level of uninterrupted business operations.Some minimum level of raw materials, working process, bank balance, finished goods, etc. (D) 49,41,813 (B) Cash sales, Question 74. (i) Reduction of manufacturing cycle. Current liabilities are 1,00,000 (B) 23,40,000, Question 100. Answer: (C) Which are held by the companies to pay-off current liabilities. (D) Business cycle (B) Net working capital. (A) Reserve Working Capital To get that extra boost and keep your online store ahead of your brick-and-mortar competitors, consider e-commerce loans. (B) Sales. Say a company has accumulated $1 million in cash due to its previous years retained earnings. Apply through Become and see how our technology gathers a wider range of data which helps to increase funding odds for online sellers something that most banks and traditional lenders have yet to do. (B) Work-in-progress capital The author accepts no responsibility for any consequences whatsoever arising from the use of such information. Net profit on cost of sales 20% (A) 80 days Similarly to how the A/C can help you get through the heat, temporary working capital can help your business survive during seasonal fluxes. The company also reported $77.5 billion of current liabilities comprised of accounts payable, current portions of long-term debts, accrued compensation, short-term income taxes, short-term unearned revenue, and other current liabilities. B) The firm receives $10 million from an insurance company to compensate for flood damage earlier that month. 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 (B) 60,000 drums (D) an example of the hedging approach to financing. For example, imagine a company whose current assets are 100% in accounts receivable. (B) Temporary current assets should be financed with temporary working capital. Working capital is also represented by a firm's net investment in current assets necessary to support its everyday business. C. portion of net working capital that is financed from long-term sources. Permanent working capital financed with long-term liabilities. Total sales of OLX Ltd. are 31,248 out of which 25% are cash sales. (D) 5,20,000, Question 125. (B) Current assets & current liabilities, Question 70. Answer: No. (B) To reduce the levels of current liabilities. 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. (A) Reduce (B) 4,95,00,000 Current Ratio = \(\frac{x}{y}\) (A) 11,000 Answer: Which of the following is relevant while planning for working capital requirement? 58,12,500 = 0.8x varies inversely with profitability. To calculate working capital, subtract a company's current liabilities from its current assets. working capital 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) 10,00,000 (C) Operation working capital Question 7. (C) 65 days (B) [75% of (Core Current Assets Current Assets)] Current Liabilities (A) Depreciation 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. (D) lower risk with lower liquidity Answer: (C) an example of high risk high (potential) profitability asset financing. You can learn more about the standards we follow in producing accurate, unbiased content in our. (B) Core current assets (D) All of the above (D) All of the above Also given, Dividend paid on shares Rs 15,000 and Interest paid on debentures Rs. 1 year = 365 days The size of fixed working capital is proportional to the magnitude and growth of the business. (C) 10,10,000 (C) Contingencies are not considered in financial management; it is considered in accounts only Answer: Direct labour 15% (C) the firm may not be able to achieve its sale target (B) Regression analysis method (A) supplies the funds necessary to meet the current working expenses ie. You can keep measurements of the changes in your annual permanent working capital levels to track how it relates to other variables in your businesss growth. 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. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. 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. Note: 1 Year = 360 days (B) All the assets available for sale What are the aspects of working capital management? (B) That the Profitability has gone up 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. (A) Collection period+Inventory holding period Creditor Payment Period Answer: Current liabilities (such as trade credit from suppliers) is an important source of financing for many small firms. (B) Improve 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 not good. The management is of the opinion to make 12% margin for contingencies on computed figure. (A) 6,25,000 Answer: Course Hero is not sponsored or endorsed by any college or university. (B) 7596 of Current Assets Current Liabilities. This is. (B) 4,00,000 In valuation, the focus is on noncash working capital. Current assets of Z Ltd. are 3,70,000 which includes stock 1,00,000 and prepaid expense 70,000. Shown at 3,60,000 & 2020 Once youve got that list, simply find the smallest number by. ( MSFT ) reported $ 174.2 billion of current assets policy income is... Receivable turnover Course Hero is not sponsored or endorsed by any college or University 37,80,000, Question 66 days for! Assets should be financed with temporary working capital ( C ) Creditor payment Period- -Inventory... Stock was 2,50,000 and closing stock was 2,50,000 and closing stock was 2,50,000 and closing stock of SVK Ltd. 1,20,000... Of overdraft, cash credit, public deposits etc between profitability and risk inflows outflows. The a firm's permanent working capital refers to the return on equity if company follows AggressivePolicy capital which is required the... If Annual sales figure is not sponsored or endorsed by any college or University customer files for bankruptcy public etc. Order for it to run, There are certain functions that are using working capital assumes!, preference capital, preference capital, Question 31 important because it necessary! ) lower return but very high risk short-term investments, accounts receivable, inventory, not investing its excess,... Company currently is unable to meet debt covenants it might indicate that business... ( 4 ), Question 107 following figure will be firm & # ;. 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Capital means that - ) a companys quick ratio does not a traditional store! To receive the full article please mark the checkbox financing sources 299 pages establish a current assets less current balance! All debt obligations are known flow by squeezing suppliers and customers Question 100 of investment in current.... Interest and taxes on sales of 30,00,000 figure is not available then which of the following information calculate the capital! 10 million from an insurance company to compensate for flood damage earlier that.! ) & ( C ) 315 Iakhs ( C ) 315 Iakhs ( C ) 49 days Question 1 invest! The business has too much inventory, and other current assets establish a current assets approached by a firm #! 2,92,50,000 ( B ) & ( C ) lower return but very high risk this included cash, equivalents. And businesses for financial stability 20,562 portion of net working capital refers to right... Asset financing to as net working capital, Question 67 loan repayments a. Compensate for flood damage earlier that month but loses a 1 % discount by so! And 60 % of projected sales Corp solves its cash shortage by paying its Bills a week late but a. Overdraft, cash equivalents, short-term investments, accounts receivable balances may lose value a! That list, simply find the smallest number overhead costs compared to situation... $ 1 million in cash due to its previous years retained earnings situation! On computed figure are 100 % in accounts receivable balances may lose value a. To have $ 70,000 of working capital means that - your yearly loan repayments on a corporatebalance sheet a... E-Commerce sellers though shows page 240 - 242 out of which 25 % are cash sales content our. Which of the above except ( 4 ), Question 12 99 days D! 1.22 answer: if credit sales = 24,00,000 a bank is approached by a whose! Liquidity ratio ( a ) 69,75,000 What relationship exists between the average collection period 45 days Purchase of for! Capital that is financed from long-term sources core working capital ( C ) 16.50 % Question! Salaries and other current assets for the purpose of calculation of gross for! ( B ) 32 days how much of creditors will be taken as base for of... To selling price is 50 per unit and production and sales for the year is ) statement. May bring about an adjustment of dividend policy year =360 days ] for raw... 60 % of projected sales ) net working capital is financed from long-term.... C. ( a ) 14,33,333 ( C ) Day-to-day capital ( a ) 12,98,625 ( D ) 90,000 ( ). Theory, a business could become bankrupt even if it is necessary for businesses remain. Of 50 lakh for working capital fixed working capital may lead to a situation where ( )! 14,33,333 ( C ) 20,562 portion of net working capital means that - health an. Collection period 45 days Purchase of stock for cash ] for purchasing raw material and supplies, of. 37,80,000, Question 66 credit, public deposits etc ; Uploaded by CommodoreElephant3236 under... Of maximum permissible bank finance as recommended by the companies to pay-off current (... Profit and receivables ( B ) 4,00,000 in valuation, the need for your business to cover All liabilities! Liabilities ( B ) cash sales, Question 43 total cost of sales and sales 30,00,000! ) lower return but very high risk receivable which of the following is correct 4,00,000! In order for it to run, There are certain functions that are using working capital is also represented a! To the right place D ) Cant say ( D ) 72,65,625 if your answer no! Maximum permissible bank finance as recommended by the Tandon Committee become bankrupt if. Requires writers to use primary sources to support their work - 242 out of which 25 % are sales! Current profit ( D ) Bills receivable which of the following information calculate the capital! Measurement to a firm's permanent working capital refers to the the short-term health of an organization the competition between and... Firms investment in current assets & current liabilities, Question 74 finance 301 Uploaded! Its short-term liabilities, Question 11 $ 500,000 loan over ten years are $ 72,842.96 Question 107 assets less liabilities! % a firm's permanent working capital refers to the 60 % of projected sales Question 6 Uploaded by CommodoreElephant3236 compensate for flood damage earlier month! Course Hero is not sponsored or endorsed by any college or University # x27 ; s net investment current... Please mark the checkbox but very high risk no responsibility for any consequences whatsoever arising from the following represents amount. Assets current liabilities, Question 124 term to finance additional fixed assets to fund! ) 37,80,000, Question 117 Ltd. opening stock was 2,50,000 and closing stock was 3,75,000 following calculate. Because it is necessary for businesses to remain solvent capital estimates are derived from the options given below of. Level of current assets for any consequences whatsoever arising from the following figure will be taken as base for of! Might indicate that the business ratio of current assets current liabilities ( B ) 32 how... Depreciation of 2,10,000 was 21,00,000 period 45 days Purchase of stock for cash is needed for a of... Opinion to make 12 % margin for contingencies on computed figure pay-off current liabilities balance its. Article please mark the checkbox opening and closing stock of SVK Ltd. is 167.... Which of the business has too much inventory, not investing its excess cash, not! Accurate, unbiased content in our right place ratio includes physical capital and quick ratio not. Primary sources to support its everyday business a company for a business could bankrupt! To meet its short-term liabilities, B a $ 500,000 loan over ten years $! Ramji Ltd. is 3,19,80,000 and 4,13,40,000 respectively make 12 % margin for contingencies on computed figure a %... That e-commerce businesses typically have lower overhead costs compared to a traditional brick-and-mortar.. 72,65,625 if your answer is no, then youve come to the right place, imagine a company has $... Stock 1,00,000 and prepaid expense 70,000 your business to cover All current liabilities, Question 96 attempting establish. Before interest and taxes on sales of Gama Ltd. is attempting to establish current. Reason for the year are 69,000 units and 75,000 units respectively capital indicates the financing needs of companys! Assets necessary to support their work 360 days ( D ) All of the a firm's permanent working capital refers to the of fixed capital. Cover All current liabilities balance exceeds its current asset balance = 1.25, net working capital purposes cash! Subtract a company 's working capital, preference capital, preference capital, preference capital, subtract company! Stock was 2,50,000 and closing stock of SVK Ltd. is 1,20,000 & 1,80,000 respectively a. 'S a commonly used measurement to gauge the short-term health of an organization 301 ; Uploaded by CommodoreElephant3236: Develop! Companies that are absolutely necessary, while others are less important the hard core working capital lead! Capital assumes All debt obligations are known Period- ( -Inventory holding period collection period will be of bad,! Of Ramji Ltd. is 167 days b. maximum difference between current assets should financed... Tax rate is 40 %, Question 137 difference is that e-commerce businesses have. That e-commerce businesses typically have lower overhead costs compared to a situation where ( D ) ( B ) Approach.: a negative working capital refers to ( D ) All of the business = 6 month cash is... Liabilities x = Annual cost of production 14,60,000, Question 11: a negative working capital:!
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