Which of the following represents the amount utilized at the time of contingencies? (D) 14,60,000 A positive working capital means that Say a company has accumulated $1 million in cash due to its previous years retained earnings. (A) Companys ability to move inventory (C) 1,09,07,550 (D) Receivables and payables (D) Profitability ratio (D) 28,462 \(2.8=\frac{28,00,000}{x}\) Inventory is listed as a part of current assets. What is the expected return on equity if company follows ModeratePolicy} Answer: Answer: (A) 2,00,000 (D) Trial and error method, Question 14. (D) Neither (A) nor (B) (B) 32 days Therefore, by the time financial information is accumulated, it's likely that the working capital position of the company has already changed. (D) All of the above (D) [80% of (Current Assets Core Current Assets)] Current Liabilities (B) II It is equally called fixed working capital; it is the minimum level of investment in the current assets of a business to carry out its minimum level of activities [2]. (D) A new personal computer for the office Closing stock is 1,50,000. portion of net working capital that is financed from long-term sources. (D) positive and negative 3,18,75,000 = 0.75 (x 70,00,000) | Best Courses & High Paying Jobs after Bachelor of Arts, MCQ Questions for Class 9 Science with Answers PDF Download Chapter Wise, Stopping By Woods On A Snowy Evening Poem Summary in English and Hindi by Robert Frost, Receivable Management Financial Management MCQ, Indian Woman Essay In Hindi, Old Man at the Bridge Summary Analysis and Explanation by Ernest Hemingway, Paragraph On Happiest Day Of My Life: A Personal Experience, Diary Entry for Class 10 CBSE Format, Topics, Examples, Samples, Landscape of The Soul Summary in English by Nathalie Trouveroy. (D) 28,462 (B) 80,000; 31,920 (B), Question 66. Answer: The company can be mindful of spending both externally to vendors and internally with what staff they have on hand. (D) 59 days Raw materials 30% (B) 2 (two), Question 51. (D) 120 days Debt Service Coverage Ratio: What is DSCR and How is It Calculated? (A) As average collection period increases (decreases) the accounts receivable turnover decreases (increases). Question 60. (C) (1), (2) & (3) (A) 18,000 (A) Acid test days Suppliers of material extend 4 week credit. Capital which is needed to meet the seasonal requirements of the business (A) Depreciation 1. (A) 60,000 It's calculated as current assets divided by current liabilities. Working Capital Cycle. What is the expected return on equity if company follows Moderate Policy? Please select both monthly turnover and operating time. (A) 60,000 (A) 9,60,000, Question 115. Net working capital 2,80,000 (D) All of the above (A) the amount utilized at the time of contingencies. Answer: Question 7. ), 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. (C) higher risk and higher liquidity (D) 18.67% (A) 26,65,000 Therefore, companies that are using working capital inefficiently or needing extra capital upfront can boost cash flow by squeezing suppliers and customers. 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. (C) Debtors are calculated on the basis of cost of goods sold and not on sale price The main reason for the difference is that e-commerce businesses typically have lower overhead costs compared to a traditional brick-and-mortar store. Answer: (C) Liquidity Ratios The company produces cement in200 kg drum. I. Learning Objective: 19-01 Show how long-term financing policy affects short-term financing requirements. Sales = 25,00,000 (C) (i) & (ii) (C) 18,00,000 (C) Long term assets should be financed from long term capital. (A) Holding period (A) Current Profit (A) greater liquidity and lower risk, Question 29. Fixed assets to proprietors fund = 1.25, Net Working Capital = 6,00,000. (C) 29,00,000 = [75% of (Current Assets Core Current Assets)] Current Liabilities Current liabilities include accounts payable, wages, taxes payable, and the current portion of long-term debt thats due within one year. Calculate maximum permissible bank finance by Third Method of Tandon Committee norms. Question 1. How to calculate permanent working capital. Cash sales = 5,00,000 (D) Making greater use of long term finance and maximizing net short term asset. Select the correct answer from the options (A) A desire to maintain an established dividend policy may affect the volume of working capital. (D) 12,500 Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. (A) Depreciation is ignored x Purchase = 20,20,000 Which of the following method is not used for calculating working capital cycle? (B) 4,95,00,000 Working Capital Turnover measures the relationship of Working Capital with: Answer: (D) 6,65,000 Maximum permissible bank finance as per first method = 75% of (A) lower return and risk. (C) [75% of (Current Assets Core Current Assets)] Current Liabilities Answer: (D) Permanent current assets should be financed with permanent working capital. Question 27. Company expects to earn 15% before interest and taxes on sales of 30,00,000. Raw material consumed and cost of goods sold in the year is 1,80,000 & 2,16,000 respectively. Answer: Management of working capital involves the following four aspects: Determining the total fund requires to meet the current operations of the firm. Working capital relies heavily on correct accounting practices, especially surrounding internal control and safeguarding of assets. Therefore, a company's working capital may change simply based on forces outside of its control. M Ltd. is engaged in large scale customer retailing. Income tax payable 56,250 (D) 3,60,000 3,71,25,000 = 0.75x (C) 75%of(CoreCurrentAssets-Current Liabilities) (D) 38,80,000 The capital required for a business is classified into two main categories: Fixed capital and Working capital. Which of the following is correct formula to calculate WIP Conversion Period? 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. 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. Working capital is a measure of a companys liquidity and short-term financial health. We reviewed their content and use your feedback to keep the quality high. Answer: (D) 4096 of Current Assets Current Liabilities Working capital is also represented by a firm's net investment in current assets necessary to support its everyday business. Understanding Coca-Cola's Capital Structure (KO). (B) Current ratio, Question 79. (D) 5,20,000 (B) 50% of (Current Assets Current Liabilities) Therefore, it is clear from the above explanation that Option A, Option C, and Option D are not accurate, and hence, Option B is the most suitable choice. 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? 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. (B) 10,00,000 (D) Conservative current assets policy (D) 14.44 (B) 5,50,000 (C) 29 days (ii) Increase of credit period allowed by creditors to the extent that do not affect the production. Current Ratio = \(\frac{x}{y}\) (B) Long term working capital Answer: This well-known chicken and egg scenario is, Giving small business owners complete control over their funding options Ever have nightmares about, We appreciate your interest in Become, to make the process easier and even faster (A) 2,40,000, Question 126. Question 59. Financing a long-lived asset with short-term financing would be (B) Current assets & current liabilities Gross working capital refers to the firm's investment in current assets. K Ltd. had sales last year of 26,50,000, including cash sales of 2,50,000. (C) 315 Iakhs Working capital = 11,70,000 + 9,58150 + 26,65,000 + 55,12,000 + 6,00,000 17,55,000 14,95,000 = 76,55,750. (B) Current ratio III. Think about your business as a car. Working Capita] = CA CL It can be divided into two . (C) Not change, Question 87. (C) Sell common stock to reduce current liabilities Question 28. N Ltd. gives the following information: What relationship exists between the average collection period and accounts receivable turnover? (C) the company is unable to meet its short-term liabilities. Answer: (A) 1,09,05,750 In valuation, the focus is on noncash working capital. Operating cycles period equals: Quick Ratio Formula With Examples, Pros and Cons, Understanding Liquidity and How to Measure It, Gross Working Capital: Definition, Calculation, Example, Vs. Net. Calculation of cost of goods sold: x = Current Assets = 1,09,05,750, Question 102. (A) Overrating Answer: Select the correct answer from the options given below. Answer: Which of the following statements is most correct? 55.625 = 151.875 x (D) 22,000 1 year = 365 days (B) 4,00,000 Raw material conversion period, Question 92. Further export sale has to be made 10096 from 90% for the purpose of calculation of gross profit. (D) higher return and higher risk. 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) If a company increases its current liabilities by 1,000 and simultaneously increases its inventories by 1,000, its current ratio must rise. (D) (1), (2), (3) and (4), Question 17. (B) Profitability Ratios Answer: Question 41. (A) 22,125 given below (D) Cost of Sales Total wages = 78,000 6 = 4,68,000 (D) 0.435; 0.405 (D) (B) & (C) is correct. Debtors collection period = ? (A) Reserve Working Capital, Question 31. (C) 4,87,500, Question 142. (D) 1.33 Total assets 60,00,000 Raw Material Stock 11,70,000 (C) Extra working capital x + 60,000 = 6,25,000 Which of the following will not be considered while calculating working capital on cash cost basis? Question 42. (C) 19 days 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. Examples of current liabilities include accounts payable, short-term debt payments, or the current portion of deferred revenue. 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) Cash sales, Question 74. (D) 4,51,370 The current ratio is a liquidity ratio that measures a companys ability to cover its short-term obligations with its current assets. (A) 13.75 This is. (B) Core current assets 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). It fluctuates over time. (A) Trade-off between profitability and risk. insufficient to cover the debt. (A) 30 days (B) 20,000 (A) 28,246 = 0.75 (1,09,05,750 32,50,000) (C) operational and financial. (A) Current ratio, Question 77. (B) (ii) & (iii) Temporary working capital usually fluctuates over the permanent working capital. Direct expenses 5% Receivable management Question 49. For example, Microsoft's working capital of $96.7 billion is greater than its current liabilities. Answer: Current Assets = 960 Lakhs; Current Liabilities = 360 Lakhs It's a commonly used measurement to gauge the short-term health of an organization. (D) All of the above (C) lower return and very low risk (B) Temporary working capital (A) Core current assets less current liabilities Stock 3,15,000 (D) Bad debt balance at the year end How much raw material stock will appear in working capital statement? The time of contingencies It & # x27 ; s Calculated As current assets policies under... Two ), Question 51 bank finance by Third Method of Tandon Committee.. 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