• Document: Question Bank. Working Capital Management
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Question Bank Working Capital Management UNIT-1-Basic concepts and overview of working capital Q1. What is meant by Working Capital Management? What are the determinants of Working Capital Management needs of an enterprise? Q2 Describe the importance of working capital for a manufacturing concern. Q3. “Inadequate working capital is disastrous; whereas redundant working capital is a criminal waste.” In light of this statement, analyze carefully the working capital situation in Indian Company. Q4. Explain in brief the gross and net concept of working capital. Which of those concepts do you prefer and why? Q5 Explain the operating cycle concept of working capital. Give suitable example. Q6 Describe the important features of the Tondon Committee’s recommendations regarding bank finance. Q7 Discuss the new trends in financing of working capital by banks. Q8 What are the various sources of working capital financing? Explain. Q9 Working Capital decisions deal with decisions ensuring an optimum mix and level of current assets and current liabilities.' Elucidate the statement. Q10 Discuss the importance of working capital management to shareholders and creditors? Q11 How is working capital affected by (a) sales (b) Technology and production cycle (c) Inflation .Explain with examples. Q12 Define working capital management. Why is it important to study the management of working capital as a separate area in financial management? Q13 Explain the concept of working capital cycle? Why is it important in working capital management? Illustrate. Q14 Explain briefly the essentials of a sound working capital management. Q15 The most important challenge for a finance manager in working capital management is to find an optimum mix and level of currents and current liabilities. Elucidate the statement. UNIT-2-Computation of working capital Q1 A co. has the following selected assets and liabilities: Cash 45,000 Retained Earnings 1, 60,000 Equity Share Capital 1, 50,000 Debtors 60,000 Inventory 1, 11,000 Debentures 1, 00,000 Provision for taxation 57,000 Outstanding expenses 21,000 Land and building 3, 00,000 Goodwill 50,000 Furniture 25,000 Creditors 39,000 You are required to determine (i) Gross working capital and (ii) Net working capital Q2 Calculate the operating cycle of a company from the following information (RS) Raw material consumption per annum 84,200 Annual cost of production 1,42,500 Annual cost of goods sold 1,53,000 Annual sales 1,95,000 Average value of current assets maintained: Raw material 12,400 Work-in-progress 7,200 Finished goods 12,200 Debtors 26,000 The company gets 30days credit from their suppliers. All sales made by the firm are on credit only. You may take one year as equal to365 days. Q3 From the following information estimate the amount of working capital by Operating cycle method taking 360 days in a year Sales 50,000 units@Rs.20 per unit Material cost Rs.10 per unit Labour cost Rs.4 per unit Overheads Rs.3.5 per unit Customers are given 45 day’s credit and 60 day’s credit is taken from suppliers. Raw material for 36 days and finished goods for 15 days are kept in stock. Production cycle is 18 days. A cash balance equal to one-third of average of other working capital is kept for contingencies. Q4 The following information is available for Sagar ltd. (Rs’000) Average stock of raw material and stores 400 Average work in p

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