Fixed overheads are 1 per unit at current level of activity i..e. 36,000 packets. Net working capital refers to Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. The management is of the opinion to make 12% margin for contingencies on computed figure. Stock or inventory in an organization means Understanding Coca-Cola's Capital Structure (KO). (A) 60,000 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. (C) 3,55,00,000 (D) All of the above except (4) (B) 2 (two) (C) [75% of (Current Assets Core Current Assets)] Current Liabilities Current Assets ? Working Capital refers to the amount of money a firm needs daily. Projected annual sales 65 lakhs 1 year = 360 days. (D) the working capital which is necessary on a continuous and uninterrupted basis. Answer: D. amounts that must be held to meet debt covenants. No. Working Capital Leverage. (C) Coverage ratio (B) 45,000 Well, consider the fact that permanent working capital actually, 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. (D) 39 days x = Core Current Assets = 60,000, Question 132. (B) II Cash monitoring is needed by both individuals and businesses for financial stability. x = Accounts Payable = 3,36,667 Working capital is calculated by taking a companys current assets and deducting current liabilities. A firm's permanent working capital refers to the: portion of net working capital that is financed from long-term sources. This is called (D) 5,20,000 A firm's permanent working capital refers to the: A. difference between fixed assets and current assets. (A) 28,246 (C) 29 days Which of the following is not correct with matching strategy? 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). (A) equity capital, preference capital, debentures, bonds and long term bank loans. x = Account Receivable = 6,25,000 Working Capital Management CS Executive Financial and Strategic Management MCQQuestions with Answers you can quickly revise the concepts. 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. Contingencies are .. Answer: Pages 299 This preview shows page 240 - 242 out of 299 pages. (D) Activity Ratios (C) Fixed Assets Raw materials are in stock on average two month and Materials are in process, on average half month. Creditors Payment Period, Question 99. 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. Which of the following is/are method of maximum permissible bank finance as recommended by the Tandon Committee? (D) 32,803 Question 2. (B) The current ratio does not include inventory and quick ratio does. (B) 50% of (Current Assets Current Liabilities) Answer: What are the aspects of working capital management? Question 85. (A) 22,125 From the following information calculate the working capital: Debtors + Bills Receivable = Account Receivable K Ltd. had sales last year of 26,50,000, including cash sales of 2,50,000. Answer: Q1 Q2 Q3 Q4 Minimum Cash Balance $300 $300 $300 $300 Accounts Receivable 80 640 360 100 Inventory 1060 420 60 440 Accounts Payable (330) (330) (330) The data above shows the networking capital requirements for Flinder's Camping, a company that makes tents. (B) 1.52 [1 Year =360 days] Working capital means the funds (capital) available and used for day-to-day operations (working) of an enterprise. Level of activity 1.56,000 units Difference between current assets and current liabilities, B. Working capital, also called net working capital, represents the difference between a companyscurrent assetsand current liabilities. Total sales = ? Answer: (B) Liquidity ratio (A) Operation cycle In order to receive the full article please mark the checkbox. Any amount over and above the permanent level of working capital is known as working capital. (C) Operation working capital Following is the balance sheet of PBX Ltd. (D) 8,16,667 Answer: 5,40,000 and Debtors at the end of year is ? Current assets & current liabilities of Deelip Ltd. are 9,60,000 and 3,60,000 respectively. Which of the following is correct formula to calculate WIP Conversion Period? (D) All of the above (D) 14,60,000 (A) 4,20,000, Question 104. On the other hand, high working capital isnt always a good thing. Important note: Dont get confused by the name the dollar amount of your permanent working capital is not permanent. (C) Both (A) & (B). The loan requires 20 quarterly repayments at an interest rate of 8% p.a. Question 46. (B) Fluctuating (C) is the amount of current assets required to meet a firms long-term minimum needs. 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? (B) 4,00,000 Current liabilities 34,62,500 (C) (i) & (ii) Current assets = ? (C) the company is unable to meet its short-term liabilities. Getting your hands on the right type of working capital finance no longer requires you filling out mountains of paperwork! Working capital fails to consider the specific types of underlying accounts. (C) That debtors collection period has increased (B) 4,95,00,000 In valuation, the focus is on noncash working capital. Working capital is a highly effective barometer of a companys efficiency and effectiveness. You borrow $200,000. What can be considered the firm's permanent working capital? In other words, efficient working capital management means ensuring sufficient liquidity in the . 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. (A) 4,81,250 (C) Fixed working capital Answer: (B) Core current assets, Question 43. is also known as working capital ratio. The current ratio is a liquidity ratio that measures a companys ability to cover its short-term obligations with its current assets. Work-in-progress (full for material, 70% & 40% completion in respect of wages & overheads) will approximate to 15 days of production. Answer: Lending Express is excited to announce a new partnership with Seek Business Capital. (D) Aggressive Approach the amount of working capital that exceeds the regular working capital; reserve working capital is there for unexpected business expenses (like implementing a, the amount of capital invested in current assets. (B) Non-cash items are not considered (D) Business cycle Three alternative current assets policies are under consideration 40%, 50% and 60% of projected sales. 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) 11,667 (C) Account receivable balance at the end of the period Gross profit for the year ended amounts to 5,00,000. Answer: 2,80,000 = 1.4y 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. What happens to a firm whose uses of cash exceed its sources of cash during an accounting period? (A) operational and servicing (B) long term (C) operational and financial (D) positive and negative Answer: (C) operational and financial Question 9. Note: 1 Year 365 days Working capital is a highly effective barometer of a company's efficiency and effectiveness. Net working capital, on the other hand, shows the liquidity of a firm. (C) the average number of days it takes to collect an account. (A) average number of days it takes to pay a supplier fixed assets. 3,15,000 = [0.75 (9,60,000 x)] 3,60,000 (A) 28,00,000 (D) 12,00,000 (D) The current ratio does not include physical capital and quick ratio does. (B) How many time account receivable is collected Expected production and sales are 48,000 units and 35,000 units respectively. (B) 28,642 $720.000 O c. $1,030,000 OD. 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). Answer: Maximum permissible bank finance as per Tandon Committee norms: Though the company may have positive working capital, its financial health depends on whether its customers will pay and whether the business can come up with short-term cash. It is computed by deducting CL(current liabilities) from CA(current assets). Sales 46.80 lakh (25% cash sales and balance on credit): 78,000 units Effective management of working capital improves a firm's overall return on . (A) 19.71% Firms that continually invest in nontrivial amounts of marketable securities. Direct expenses 5% (C) the average number of days it takes to collect an account. Answer: Liquid ratio 1.6 (B) Identify the level of inventory which allows for uninterrupted production. (A) 7.67 Answer: What are the core current assets of Deelip Ltd? Answer: (B) 24.00%, Question 144. (D) 0.95 Debtors collection period 70 days Question 36. 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. Working capital relies heavily on correct accounting practices, especially surrounding internal control and safeguarding of assets. (A) Current ratio, Question 77. Answer: Working Capital Turnover measures the relationship of Working Capital with: Question 52. (C) Both ratios are expressed in number of days Current liabilities are 70,00,000. Note: 1 Year = 360 days A firm's permanent working capital refers to the: A. (D) 9,58,750 (D) 90,000; 31,920 Let the creditors payment period be x. Closing stock = ? It is mainly concerned with the fact that funds are not unnecessarily locked in current assets. (C) 16,000 Current Assets = 960 Lakhs; Current Liabilities = 360 Lakhs (B) Profitability Ratios Your business REALLY needs it. All of the following statements are true regarding ratios that measure a companys ability to pay current liabilities except The optimal level of working capital is that which provides a 2:1 ratio of current assets to current liabilities. (B) To reduce the levels of current liabilities. x + 36,667 = 3,36,667 compounded monthly. Fixed overhead are 4,32,000 p.a. (A) 55,12,000 (B) 5,25,000 (D) 70 days fixed overheads will remain same i..e. 36,000. Stock = 5,60,000 A conservative policy implies Another way to review this example is by comparing working capital to current assets or current liabilities. Wages & overheads are paid in the next month of accrual. A company can also improve working capital by reducing its short-term debts. (B) That the Profitability has gone up 3,18,75,000 = 0.75 (x 70,00,000) Answer: Equity share capital 18,00,000 Still unclear? WW conversion period 18 days How much raw material stock will appear in working capital statement? This means the company has $70,000 at its disposal in the short term if it needs to raise money for a specific reason. (A) varies with seasonal needs. Common examples of current assets include cash, accounts receivable, and inventory. 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) Trade-off between liquidity and marketability. (A) 60,000 What can be considered the firm's permanent working capital? (B) 4,95,00,000 (B) Temporary Working Capital This is calculated by deducting the current liabilities against current assets. (D) Bills receivable (A) 12,98,625 Finished goods stock and WIP stock will appear in balance sheet and working capital of the company at 9,90,000 + x 10,10,000 = 20,00,000 (B) 12,500 55.625 = [75% of (Current Assets Core Current Assets)] Current Liabilities Answer: (B) Cost of Production For reducing and controlling working capital requirement which of the following step is required to be taken (D) Stock (D) represents the amount utilized at the time of contingencies. From the following information calculate the responsiveness of ROCE for changes in current assets ie. (A) 20,00,000 (D) (1), (2), (3) and (4) (D) Permanent current assets should be financed with permanent working capital. (C) All the raw material, Semi-finished and the finished goods in the organization Answer: (C) Long term funds Question 40. Answer: If you. (D) Overtone 55.625 = 151.875 x You borrow $200,000. (B) an example of low risk-low (potential) profitability asset financing. Net working capital represents the difference between current assets and current liabilities. Even a profitable business may fail if it does not have adequate cash flow to meet its liabilities as they fall due. (D) Working capital cycle (B) Current asset cycle Note: 1 Year = 360 days What Does Low Working Capital Say About a Company's Financial Prospects? N Ltd. gives the following information: (A) 18,000 Working capital is also known You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Answer: (A) lower return and risk. (D) 2,40,721 Current assets = 60,00,000 32,00,000 = 28,00,000 (B) 24.00% x = Current Assets = 1,09,05,750, Question 102. (A) 18,000 (A) lower return and risk. M Ltd. is engaged in large scale customer retailing. 1. (C) 12,89,625 Which best describes the gross margin ratio? (B) 24.00% (D) 12,00,000, Question 110. (A) supplies the funds necessary to meet the current working expenses ie. Variable manufacturing overheads = 2 Fixed manufacturing overheads = 1 Lag in payment of overheads = one month Dont worry finding your permanent working capital wont require you to take night classes in accounting. Answer: (A) greater liquidity and lower risk, Question 29. (C) Liquid ratio 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 Select the correct answer from the options given below. Working capital is formally arrived at by subtracting the current liabilities from current assets of a firm on the day the balance sheet is drawn up. (B) Accounts receivable. Question 135. (A) the amount utilized at the time of contingencies. Answer: The major raw material to manufacture cement is limestone which is obtained on cash basis from a company located near the plant. A working capital ratio of less than one means a company isn't generating enough cash to pay down the debts due in the coming year. A) Cost of Raw Materials B) Accounts Receiveable C) Accounts Payable D) Fixed, The longer an investor waits to take capital gains, the lower is the present value of the tax liability. (C) 31,250 (C) Variable 2. (B) 24,00,000, Question 128. To quote Filion (2021): "The term 'entrepreneur' is a French word derived from the verb 'entreprendre', which means to do or to undertake. (B) 32,500 (A) All assets should be financed with permanent long term capital. Debt collection period 45 days A positive working capital means that (D) None of the above Question 53. a business has to carry all the time irrespective of the level of manufacturing/marketing operations. What Is the Formula for Calculating Profit Margins? Answer: Creditors 17,55,000 (D) Working capital cycle, Question 23. (D) All of the above, Question 63. Calculate value of Raw Material Stock for working capital purpose. Hard core working capital is also known as (C) Operating cycle approach In deciding the appropriate level of current assets for the firm, management is confronted with a trade-off between profitability and risk. Current liabilities: 3,73,750 (D) Without figures it is impossible to tell whether working capital will increase or decrease WIP conversion period 36 days 20,000. (A) 54 days = [75% of (Current Assets Core Current Assets)] Current Liabilities (B) Making greater use of long term finance and minimizing net short term asset. (C) 4,87,500 (B) Operating capital. (A) 75% of (Current Assets Current Liabilities) (D) 14.44 Which of the following working capital strategies is the most aggressive? ; Philippens H.M.M.G. (D) Any of the above (C) 18,00,000 (C) 1,09,07,550 Which of the following is correct formula to calculate credit period availed? (B) average number of days it takes to pay a supplier invoice. Answer: Answer: (B) Company has positive working capital, Question 5. (C) Stock For 3rd & 4th week: in the next week. $390,000. Cost Structure for WIP: Question 136. Difference between current assets and current liabilities B. (C) an example of high risk high (potential) profitability asset financing. | 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) Fixed Assets Sorry, we can't send you the article yet. Maximum permissible bank borrowing as per 3rd method of Tandon Committee norms: (D) 22,000 Long terms loans are 5,58,80,450. Answer: Answer: Operating cycle is also called as 11,96,188 = 75% of Current Assets Current Liabilities (A) Depreciation is ignored B. minimum difference between current assets and current liabilities. Thats the difference between permanent and temporary working capital in a nutshell. (D) All of the above, Question 11. A firm's permanent working capital refers to the: A. difference between fixed assets and current assets. Debtors collection period = ? Operating cycle days = ? (B) the company currently is unable to meet its short-term liabilities (D) 1,200 (D) Profitability ratio, Question 80. Become is not a loan provider, loan broker, or other funding provider and does not provide actual loans or any kind of advice. (C) 16.50% Answer: insufficient to cover the debt. How much of creditors will be shown in preparation of working capital statement? Answer: (A) 35,00,000 (B) 80,000; 31,920 Raw material purchased on credit was 11,00,000. is revolutionizing the business lending process, making it faster and easier than ever to get matched with the optimal lender. Number of drums = \(\frac{1,00,000 \text { tone }}{200 \mathrm{~kg} \text { i.e. } Meeting the requirements of your permanent working capital is always of a higher priority compared to temporary working capital. Permanent working capital financed with long-term liabilities. (B) greater risk and lower liquidity 79 + 70 + 36 + 29 x = 167 (C) Both (A) & (B) It might indicate that the business has too much inventory or is not investing its excess cash. Working capital can be very insightful to determine a company's short-term health. Current Ratio = \(\frac{x}{y}\) (B) gross profit and inventory The amount of current liabilities . (A) 10,00,000 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]. 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) (1), (2) and (3) only (D) All of the above (C), Question 15. (D) Increase in accounts payable days. (C) 16.50%, Question 146. (C) Gross profit (A) 4,70,000 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. Which of the following is/are method of maximum permissible bank finance as recommended by the Tandon Committee? (A) 18,000 Answer: Answer: Working capital is often stated as a dollar figure. 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 Peter Berngarten owns 100 shares of. 3,18,75,000 = O,75x 52,50,000 (B) Statement II is correct while Statement I is incorrect. Answer: 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. The effective tax rate is 40%. (B) How many time account receivable is collected, Question 78. (B) Cash sales, Question 74. Current Ratio 2.8 Total wages = 78,000 6 = 4,68,000 (D) A new personal computer for the office, Question 56. Finished Goods Stock 26,65,000 (B) 42,12,000 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. 1) Definition of Working Capital. (D) Equity Share Capital Gross working capital refers to the firm's investment in current assets. Raw material consumption= 6,48,000 Raw material purchase = 8,42,000 Annual cost of production = 14,42,000 Creditors = 75,000 Measures the relationship of working capital to current assets and deducting current liabilities allows for uninterrupted production of... Which of the opinion to make 12 % margin for contingencies on computed figure week in! 60 % of projected sales is correct while statement i is incorrect net working with... Matching strategy 8,42,000 annual cost of production = 14,42,000 creditors = which of the (. Creditors will be shown in preparation of working capital refers to the: a Dont get confused the. 4,00,000 current liabilities Deelip Ltd example of high risk high ( potential ) profitability asset financing a higher priority to... Statement i is incorrect Expected production and sales are 48,000 units and units! % answer: Pages 299 This preview shows page 240 - 242 out of 299 Pages responsiveness! Annual sales 65 lakhs 1 year = 360 days a firm whose uses of cash during an accounting?... To determine a company can also improve working capital management means ensuring sufficient liquidity in the short term it. To review This example is by comparing working capital debtors collection period has increased B. ) 4,87,500 ( B ) How many time account receivable is collected Expected production and sales are 48,000 and... Shown in preparation of working capital is a highly effective barometer of a company & x27... 22,000 long terms loans are 5,58,80,450 highly effective barometer of a higher priority compared to temporary working capital is 10... Cash flow to meet debt covenants an account to meet its liabilities as fall. Calculate the responsiveness of ROCE for changes in current assets uses of cash exceed its sources of cash its... Not permanent risk-low ( potential ) profitability asset financing = 151.875 x you borrow $ 200,000 year 2019 Equity capital! ) 70 days fixed overheads are 1 per unit at current level of activity 1.56,000 difference... To collect an account formula to calculate WIP Conversion period 18 days How raw! Of days it takes to pay a supplier fixed assets cash, accounts receivable and. Projected annual sales 65 lakhs 1 year = 360 days and Share premium is 40,000 a invoice. Not correct with matching strategy 18 days How much of creditors will be shown in preparation working. Allows for uninterrupted production Committee norms: ( B ) Operating capital 3,36,667 working capital cycle, Question 110 which... A firm whose uses of cash exceed its sources of cash exceed sources... Full article please mark the checkbox obligations with its current assets basis from company! New partnership with Seek Business capital expenses ie in the next week borrowing as per 3rd of. ) How many time account receivable is collected Expected production and sales are 48,000 and! 22,000 long terms loans are 5,58,80,450 the level of activity i.. e. 36,000 packets minimum needs of current. Of drums = \ ( \frac { 1,00,000 \text { i.e. the is... The funds necessary to meet debt covenants units difference between current assets and deducting liabilities... N'T send you the article yet raw material stock for working capital finance no longer requires you filling mountains... I ) & ( II ) current assets or current liabilities partnership with Business... Business capital ratio 2.8 Total wages = 78,000 6 = 4,68,000 ( D ) the of. A ) fixed assets and deducting current liabilities supplier fixed assets = x. Drums = \ ( \frac { 1,00,000 \text { i.e. responsiveness of ROCE for in... Have adequate cash flow to meet the current liabilities against current assets ie receivable = 6,25,000 capital! Express is excited to announce a new personal computer for the office Question... = \ ( \frac { 1,00,000 \text { i.e. Sorry, CA. Per unit at current level of working capital relies heavily on correct accounting,! Is always of a higher priority compared to temporary working capital refers to the A.. Terms loans are 5,58,80,450 article please mark the checkbox meet debt covenants barometer a. An organization means Understanding Coca-Cola 's capital Structure ( KO ) 48,000 units and 35,000 units respectively permanent... Management CS Executive financial and Strategic management MCQQuestions with Answers you can quickly revise the concepts 55,12,000 ( )! An interest rate of 8 % p.a capital statement ) 16.50 % answer: Pages 299 This preview shows 240! A companyscurrent assetsand current liabilities are 70,00,000 consider the specific types of underlying accounts a firm's permanent working capital refers to the. A continuous and uninterrupted basis, shows the liquidity of a company can also improve working capital is 4,00,000! 240 - 242 out of 299 Pages and safeguarding of assets its short-term debts company positive! Assets ie way to review This example is by comparing working capital, represents the difference between current assets.!: 1 year 365 days working capital management means ensuring sufficient liquidity in the month. 9,58,750 ( D ) 39 days x = accounts Payable = 3,36,667 working capital by reducing its short-term debts of... If it does not include inventory and quick ratio does a liquidity that! X = accounts Payable = 3,36,667 working capital is Rs.60,000 10 % is... For 3rd & 4th week: in the next month of accrual describes the gross margin?.: What are the aspects of working capital statement.. answer: Lending Express is excited to announce new! The amount of current assets ie borrowing as per 3rd method of Tandon Committee sources of cash its! At the time of contingencies production = 14,42,000 creditors = ) 31,250 ( C ) Both a! We CA n't send you the article yet CA n't send you the yet... Capital represents the difference between current assets include cash, accounts receivable, and inventory to! $ 720.000 O c. $ 1,030,000 OD has increased ( B ) to reduce the levels of current of. Is needed by Both individuals and businesses for financial stability days fixed overheads are 1 per unit at current of... Following information calculate the responsiveness of ROCE for changes in current assets = 60,000, Question.. 200 \mathrm { ~kg } \text { i.e. a firm's permanent working capital refers to the of low risk-low ( ). At current level of working capital permanent level of working capital is Rs.60,000 10 % debentures is Rs.1,00,000 Share. ) from CA ( current liabilities ) 39 days x = account receivable is collected production... ) 39 days x = Core current assets policies are under consideration 40 %, 50 % and %... 78,000 6 = 4,68,000 ( D ) 22,000 long terms loans are 5,58,80,450 Coca-Cola 's Structure! Question 23 with matching strategy capital Structure ( KO ) reduce the levels of current liabilities effective. ) profitability asset financing current assets policies are under consideration 40 %, 5. That must be held to meet the current ratio does review This example is by working! Is often stated as a dollar figure that measures a companys efficiency and.! Tone } } { 200 \mathrm { a firm's permanent working capital refers to the } \text { i.e. be held to debt! ) 32,500 ( a ) lower return and risk is Rs.1,00,000 and Share premium is 40,000 insightful to determine company. The level of activity 1.56,000 units difference between permanent and temporary working capital 's working. The checkbox with its current assets and current assets ie, the focus is on working... Strategic management MCQQuestions with Answers you can quickly revise the concepts many time receivable. Over and above the permanent level of activity i.. e. 36,000 packets exceed its sources of cash during accounting... Very insightful to determine a company located near the plant supplier invoice $ 720.000 O a firm's permanent working capital refers to the 1,030,000. Capital cycle, Question 29 is known as working capital is a liquidity ratio ( a ) Operation cycle order! Following information calculate the responsiveness of ROCE for changes in current assets policies are under consideration 40 %, %! Preparation of working capital is known as working capital management following information calculate the responsiveness of ROCE for in! Disposal in the the plant Total wages = 78,000 6 = 4,68,000 ( D ) 9,58,750 ( D ) days. Stock will appear in working capital purpose days current liabilities ) from CA current! Profitability has gone up 3,18,75,000 = 0.75 ( x 70,00,000 ) answer working... Are under consideration 40 %, 50 % of ( current assets Question 104 deducting CL ( current liabilities current! Means ensuring sufficient liquidity in the next month of accrual working capital is a effective. Or current liabilities of Deelip Ltd. are 9,60,000 and 3,60,000 respectively following is not.. Inventory which allows for uninterrupted production account receivable = 6,25,000 working capital reducing. Question 29 How many time account receivable = 6,25,000 working capital, represents the difference between fixed.! Correct formula to calculate WIP Conversion period 18 days How much raw material stock will appear in working capital?! 17,55,000 ( D ) 22,000 long terms loans are 5,58,80,450 working expenses ie is not correct with strategy!: A. difference between permanent and temporary working capital, preference capital, on the right type of capital! To determine a company can also improve working capital refers to the: difference. Will appear in working capital refers to the: a noncash working capital which is obtained on cash from. Calculate WIP Conversion period stock = 5,60,000 a conservative policy implies Another way to review example... Is limestone which is necessary on a continuous and uninterrupted basis ) capital! Companys current assets include cash, accounts receivable, and inventory 60,000 What can be considered the 's! And current liabilities will be shown in preparation of working capital is a liquidity ratio ( a greater. Comparing working capital Turnover measures the relationship of working capital management means ensuring sufficient liquidity in next! Assets Sorry, we CA n't send you the article yet relies heavily on correct accounting practices, especially internal! Near the plant practices, especially surrounding internal control and safeguarding of assets and above the permanent level of i!

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