At the end of 2021, Microsoft (MSFT) reported $174.2 billion of current assets. (D) Capital relating to main projects of the company (D) All of the above. Managing working capital has a significant impact on the financial performance of firms. (B) Reserve Margin Working Capital Answer: A company has negative working if its ratio of current assets to liabilities is less than one (or if it has more current liabilities than current assets). (D) 0.435; 0.405 What relationship exists between the average collection period and accounts receivable turnover? Question 64. 1,20,000 + Purchases 1,80,000 = 3,60,000 Question 7. Become is not a loan provider, loan broker, or other funding provider and does not provide actual loans or any kind of advice. Following is the balance sheet of PBX Ltd. 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. (C) 2,92,50,000 (A) The current ratio includes inventory and quick ratio does not. (D) All of the above, Question 24. Working Capital 1,200 1,000 200, Question 129. Which of the following will be considered while calculating working capital? (C) Coverage ratio insufficient to cover the debt. Select the correct answer from the options given below. (A) (1) only (B) 45,000 2. (D) Both ratios are expressed in number of times receivables are collected per year (C) 16.50% (B) 20,652 Select the correct answer from the options This problem has been solved! (B) Current ratio, Question 79. A firm's permanent working capital refers to the: A. difference between current assets and current liabilities. 45,000 = 0.75x Answer: 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; . (C) Creditors velocity Maximum permissible bank finance as per first method of Tandon Committee norms was 57,41,813 while current liabilities are reported at 32,50,000. 3,18,75,000 = 75% of (Current Assets Current Liabilities) (D) Trade-off between short-term versus long-term borrowing. Purchases = 4,20,000 x = Current Assets = 1,09,05,750, Question 102. given below 58,12,500 + 0.2.x = x Hence total fixed overheads at current level of activity 36,000 1 = 36,000. Calculate closing stock of WIP. Answer: (B) current assets minus current liabilities. Answer: Which of the following statements is most correct? Creditors 4 weeks \(\left(4,20,000 \times \frac{4}{52}\right)\) = 32308, Question 138. Inventory balance will increase before the peak . (A) 32,380 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. ; Philippens H.M.M.G. (C) 16,33,333 (A) 62,500 Working capital means the funds (capital) available and used for day-to-day operations (working) of an enterprise. A company plans to manufacture and sell 400 units of domestic appliances per month at a price of 600 each. (B) Making greater use of long term finance and minimizing net short term asset. Which of the following is not a metric to use for measuring the length of the cash cycle? NS Ltd. gives the following information: (C) Long term funds (C) 16.50% (A) How often account receivable received Answer: (A) Fixed working capital (C) 32,308 (A) inventory and receivables. (D) Variable working capital, Question 22. (D) 8,00,000 (A) Gross Working Capital (B) 81,79,313 (A) 5,40,000 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. (A) Depreciation (D) 1.33 Answer: (Assume a 360 days year.) Answer: Fixed (C) 7,35,000 Firms that continually invest in nontrivial amounts of marketable securities. (A) 29 days & 39 days 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. Current ratio =\( \frac{4,00,000}{3,00,000}=1.33\), Question 97. Financial statement of A Ltd. shows the following data: Answer: (D) 12,00,000, Question 110. (B) 4,95,00,000 This means the company does not have enough resources in the short-term to pay off its debts, and it must get creative on finding a way to make sure it can pay its short-term bills on time. 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(A) 72 days (B) 6.77, Question 95. Answer: Answer: (D) 1,200 (A) Bills receivable (A) Working cycle (C) Increase in credit period given to customers Increase in working capital indicates outflow of cash and decrease in working capital indicates inflow of cash. After all, a business cannot rely on paper profits to pay its billsthose bills need to be paid in cash readily in hand. (D) the company is able to pay-off its short-term liabilities. What is the expected return on equity if company follows ModeratePolicy} Question 42. Annual operating cost including depreciation of 2,10,000 was 21,00,000. (A) 4,20,000, Question 104. = 57,41,813, Question 118. What can be considered the firm's permanent working capital? Equity share capital 18,00,000 (A) Core current assets less current liabilities (C) lower return but very high risk. Current assets & current liabilities of Deelip Ltd. are 9,60,000 and 3,60,000 respectively. 2,50,000 + Cost of production/purchase 3,75,000 = 9,75,000 (C) mode of overdraft, cash credit, public deposits etc. is an approach adopted by a business when the expected level of current asset is not too high or too low. It makes 20% sales on cash basis. Answer: Answer: Operating cycles period equals: Total sales of OLX Ltd. are 31,248 out of which 25% are cash sales. These include white papers, government data, original reporting, and interviews with industry experts. Answer: (B) 6,90,000 The current assets balance may increase or decrease due to various reasons. Answer: Stock = 5,60,000 Current liabilities = 5,88,778 2,88,778 = 3,00,000 Fluctuating Working Capital is also called as (B) Over trading, Question 30. Answer: It experiences a decrease in its cash balance. (A) Added to gross working capital. 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. For purposes of WCM, 'working capital' refers to the difference between current assets and current . Question 55. (A) 1 (one) compounded monthly. Determine net cash flow from financing activities. (B) Current Liabilities, Question 67. No. (A) 57,41,813 Answer: Answer: (D) represents the amount utilized at the time of contingencies. D) firm uses no equity in its capital structure. (A) Companys ability to move inventory If the trend of the current ratio is increasing, while the trend of the acid-test ratio is decreasing over a period of time, this could be a warning that the firm is: Variable manufacturing overheads = 2 Fixed manufacturing overheads = 1 Lag in payment of overheads = one month C. portion of net working capital that is financed from long-term sources. Operating cost = ? Outstanding Overheads = Total Overheads = \(\times \frac{\text { Lag in payment of overheads }}{360}\) (D) Trading capital (B) lower return and risk Debt collection period 45 days We reviewed their content and use your feedback to keep the quality high. (B) 360 lakhs (C) 25 days & 35 days It fluctuates over time. But do you know what it is? 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. N Ltd. gives the following information: (C) is the amount of current assets required to meet a firms long-term minimum needs. (A) higher return and risk (D), Question 20. Current assets of Z Ltd. are 3,70,000 which includes stock 1,00,000 and prepaid expense 70,000. (D) Profitability ratio, Question 80. On the other hand, if the radio, window, or A/C stops working, the car will still do its job. (D) 49,41,813 Question 2. From the following information, you are required to forecast its working capital requirement: The management is of the opinion to make 20% margin for contingencies on net working capital. The CTC Ltd. is attempting to establish a current assets policy. (B) 12,500 Which of the following is correct formula to calculate credit period availed? Needless to say, thats a fairly broad definition. It might indicate that the business has too much inventory or is not investing its excess cash. (D) 19,800 Current Liabilities 10,00,000 Peter Berngarten owns 100 shares of. All of the following statements are true regarding ratios that measure a companys ability to pay current liabilities except (C) 5096 of Current Assets Current Liabilities (D) 49,41,813 Answer: (A) 19.71% What monthly deposit must you make into a savings account to reach your goal? Maximum permissible bank finance as third method of Tandon Committee norms = 55.625 lakh Question 59. (B) To reduce the levels of current liabilities. (A) Reserve Working Capital, Question 31. (A) 76,75,550 (A) 47 days (B) Cash Which of the following is not considered while calculating accounts receivable period? Investopedia requires writers to use primary sources to support their work. Important note: Dont get confused by the name the dollar amount of your permanent working capital is not permanent. Answer: What is the expected return on equity if company follows Moderate Policy? (A) 136.25 = [0.75 (960 60)] 360 Question 81. 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. Which of the following is/are method of maximum permissible bank finance as recommended by the Tandon Committee? S Ltd. gives the following information: (D) 4,76,000 x + 60,000 = 6,25,000 (B) Cash sales, Question 74. 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. Which of the following is not correct with matching strategy? (A) Leverage ratio Opening Raw Material + Purchases Closing Raw Material = Material Consumed The working capital ratio, also known as the current ratio, is a measure of the company's ability to meet short-term obligations. (A) That the Capital Employed has reduced (B) Accounts receivable. Current Assets are compared with: (D) none of the above 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. 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. x = 47 Answer: (A) greater liquidity and lower risk Short-term assets financed with equity. 9,90,000 + x 10,10,000 = 20,00,000 (D) Cost of Sales A) firm uses no debt in its capital structure. (D) Any of the above (B) 24.00% For reducing and controlling working capital requirement which of the following step is required to be taken An aggressive policy produces Working capital is also represented by a firm's net investment in current assets necessary to support its everyday business. (D) 90,000; 31,920, Question 130. 58,12,500 = 0.8x Current liabilities are 1,00,000 Fixed assets are 6,00,000 and the firm plans to maintain a 50% debt-to-assets ratio. Material consumed in income statement is shown at 3,60,000. Question 140. (D) Both (A) and (C) Answer: (B) Long term working capital Creditors Turnover Ratio = ? (A) Borrow short term to finance additional fixed assets. (A) 10 (C) 20,562 (B) Temporary current assets should be financed with temporary working capital. 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 Current assets are available within 12 months; current liabilities are due within 12 months. 11,96,188 = 75% of Current Assets Current Liabilities Accounts payable are analyzed by the (A) Fixed Assets x = Annual Cost of Production 14,60,000, Question 96. A firm's permanent working capital refers to the: portion of net working capital that is financed from long-term sources. 55.625 = 151.875 x Answer: (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? for purchasing raw material and supplies, payment of wages, salaries and other sundry expenses. (B) 0.403;0.453 Inventory turnover ratio evaluates: 2.4 = \(\frac{x}{y}\) (A) 2.48 (C) 16.50%, Question 146. Creditors Turnover Ratio =\(\frac{11,00,000}{80,000}\) = 13.75, Question 105. 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) 3,30,367 (C) Sell common stock to reduce current liabilities (B) (1) and (2) only Just because youre running a small business, doesnt mean it has to stay that way., Getting a small business loan can beone of the more challenging aspects of running a, What came first the job or the experience? (D) Credit period, Question 69. Sales = 25,00,000 (A) 14,33,333 Raw material purchased on credit was 11,00,000. (D) Business cycle Direct expenses 5% (B) II (A) operational and servicing (D) 16,66,667 (B) Deducted from gross working capital (D) Both (A) and (C), Question 37. The current ratio is a liquidity ratio that measures a companys ability to cover its short-term obligations with its current assets. (D) current assets. That will be your permanent working capital for the month. (C) Payment of dividend may reduce cash in current assets considerably which in turn may reduce the available working capital for the company. Total Overheads = 1,17,00,000, Question 127. Answer: Creditors velocity = 2 months. (C) mode of overdraft, cash credit, public deposits etc. 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. Question 86. III. Operating cycle days of Ramji Ltd. is 167 days. Answer: (D) 28,462 Inventory is listed as a part of current assets. Answer: 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. Wages & overheads are paid in the next month of accrual. Liquid Ratio = ? (B), Question 66. Permanent working capital: It refers to the hard core working capital. x = Current Assets = 2,00,000 2.4 = 4,80,000, Question 111. (4) Perpetual inventory policy D) A customer pays an outstanding bill. Working capital management is a strategy that requires monitoring a company's current assets and liabilities to ensure its efficient operation. Conversion of raw materials into work in process. (A) 11,000 (D) 18.67% B. maximum difference between current assets and current liabilities. (D) That Sales has decreased. (C) Accounts payable days Also referred to as fixed working capital, a businesss permanent working capital is the starting point of working capital that a business expects to remain consistent from one year to the next. Only Assertions is correct Only Reason is correct Finished goods stock = 200 units (C) Not change Answer: No. (C) Stock Answer: Although commercial paper is unsecured, the companies that issue this short-term security are: Issuing additional long-term debt of $5 million and buying new long-term assets worth $5 million will result in a net cash, Issuing new long-term debt is a source of capital and buying new assets is a use of cash. Working Capital Management CS Executive Financial and Strategic Management MCQQuestions with Answers you can quickly revise the concepts. Credit Sales = 24,00,000 (B) How many time account receivable is collected, Question 78. (C) is the amount of current assets required to meet a firms long-term minimum needs. (A) If a company increases its current liabilities by 1,000 and simultaneously increases its inventories by 1,000, its current ratio must rise. Answer: Calculate maximum permissible bank finance by Third Method of Tandon Committee norms. Net working capital refers to Packing material 10% (C) (1), (2) & (3) Question 141. x = Account Receivable = 6,25,000 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. A bank is approached by a company for a loan of 50 lakh for working capital purposes. Answer: (A) 9,60,000 (C) Liquidity Ratios 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. (C) (i) & (ii) Side note: If you see your working capital finance is starting to take a dip, consider taking a permanent working capital loan. Updated on: 5 January 2023. Avatar Corp solves its cash shortage by paying its bills a week late but loses a 1% discount by doing so. (B) 76,55,750 (C) 4,87,500 (D) 425 lakhs 2. (A) equity capital, preference capital, debentures, bonds and long term bank loans. Note: 1 Year = 360 days Assertion (A): Working capital refers to the gross working capital and represents the amount of funds invested in current assets. equivalent to borrowing at an annual interest rate of: Annual Interest Rate = 1 / (0.99) ^ 52 = 68.6%. | 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. (A) the company is able to pay-off its long-term liabilities. Answer: What does the accounts receivable turnover ratio tell us? 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: (A) 50,000 drums (B) Fluctuating 3,15,000 = 7,20,000 0.75x 3,60,000 Answer: (A) the average number of days it takes to make sale. (A) the amount utilized at the time of contingencies. (B) 7596 of Current Assets Current Liabilities Answer: (B) Liquidity ratio If the company were to invest all $1 million at once, it could find itself with insufficient current assets to pay for its current liabilities. (D) 5,20,000, Question 125. (B) the firm may not be able to meet its liabilities All figures are in thousands of dollars. Answer: (C) 42,64,000, Question 123. (B) 50% of (Current Assets Current Liabilities) Therefore, at the end of 2021, Microsoft's working capital metric was $96.7 billion. 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