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Master
of Business Administration
Paper
Code: MB FM– 204
Paper
Title: Working Capital Management
Q.
1. Short answer type questions: Limit 100 - 150
Q. a. Differentiate
between
Gross Working Capital
and Net working Capital.
Answer: Net working capital
- Qualitative
in nature.
- Tells
about whether company can meet its operating expenses and its current
liability.
- Net
working capital is result of difference between current and current
liability.
- Concept
used in accounting system.
- Suitable
for
Q. b. Name
the factors determining
Working
Capital.
Answer: Length of the operating cycle
The length of the operating cycle refers to the number of days
taken, right from procuring material to making collections against sales from
customers. This can be
measured in days or months.
·
Inventory
management
Q. c. On
what factors trade credit
depends?
Answer: Trade
credit is the credit extended by one trader to another for the purchase of
goods and services.
The extent and
pattern of trade credit within an industry depend on a number of factors,
including the average rate of turnover of stock, the nature of the goods
involved—e.g., their perishability—the rela
Q. d. Explain
the meaning of
Commercial
Paper.
Answer: Commercial
paper is an unsecured, short period debt tool issued by a company, usually for
the finance and inventories and temporary liabilities. The maturities in this
paper do not last longer than 270 days. These papers are like a promissory note
allotted at a huge cost and exchangeable between the All-India Financial
Institutions (FIs) and Primary Dealers (PDs).
Most of the
Q. e. Discuss
the factors determining the
investment in
inventory
Answer: Level
Of Safety Stock
If
a firm maintains high level of safety stock because of relatively larger degree
of uncertainty associated to
production and sales, the size of investment in inventories is also higher.
Q f. How
would you
estimate the recorder
level?
Answer: In
management accounting, reorder level (or reorder point) is the inventory level
at which a company would place a new order or start a new manufacturing run.
Reorder level depends on a company’s work-order lead
time and its demand during that time and whether the company maintain a safety
stock. Work-order lead time is the time the company’s
suppliers take in
Q. g. Whatis
the objective of management
of receivables?
Answer: Receivables are
amounts owed to the company by the customers to who company sell goods or
services in the normal course of business. The main purpose of managing
receivables is to meet competition and to increase sales and profits. Receivable
management is a process of managing the account receivables within a business
organisation. Account receivables
Q. h. How
credit analysis is
done?
Answer: Stages in the Credit Analysis Process
The credit
analysis process is a lengthy one, lasting from a few weeks to months. It
starts from the information-collection stage up to the decision-making stage
when the lender decides whether to approve the loan application and, if
approved, how much credit to extend to the borrower.
The
following are the key stages in the credit analysis process:
Q. i. What
are the functions of
Cash
Management?
Answer: Cash Management
Cash
management is also known as treasury management, refers to the process of
collection, management, and usage of cash flows for the purpose of maintaining
a decent level of liquidity, and it involves financial instruments such as
treasury bills, certificate of deposit, and money market funds making the same
substance for not just individuals but organizations too.
Functions of Cash
Management
·
Inventory Management
Q.
j. Explain
the motives
for holding cash.
Answer: C ash
is known as most liquid and less productive assets of a firm. Cash management
means optimal cash maintain in a business. If an excess is taken in a business,
it is harmful because it does not grow profit. Contrary if the cash is taken
deficit position them the liquidity crises exists. It is a key component of a
company’s financial stability and solvency.
Q.2
what do you understand by working capital? Explain the concept and determinants
of Working Capital.
Answer: Concept of Working
Capital:
The
funds invested in current assets are termed as working capital. It is the fund
that is needed to run the day-to-day operations. It circulates in the business
like the blood circulates in a living body. Generally, working capital refers
to the current assets of a company that are changed from one form to another in
the ordinary course of business, i.e. from cash to inventory, inventory to work
in progress (WIP), WIP to finished goods,
Q.3 what is
factoring? Discuss the types and benefits of factoring.
Answer: What is Factoring?
Factoring is a financial technique
where a specialized firm (factor) purchases from the clients accounts
receivables that result from the sales of goods or services to customers. In
this way, the customer of the client firm becomes the debtor of the factor and
has to fulfil its obligations towards the factor directly.
The factoring agreement usually
assumes
Q.4 what do
you mean by Receivable Management? How will you control the investment in Receivables?
Explain.
Answer: Receivable management is a process of
managing the account receivables within a business organisation. Account
receivables simply mean credit extended by the company to its customers and are
treated as liquid assets. It involves taking decisions regarding the investment
to be made in trade debtors by organisation. Deciding the proper amount be lent
by the company to its customers in the form of credit sales is quite important.
It affects the overall cash availability for undertaking various operations.
Q.5 Discuss
the management problems involved in the planning and control of cash. Explain
the Importance of cash budgets main tool of cash planning.
Answer: Here
are several cash management problems and solutions you can take towards them.
1. Too High of Overhead
One
of the biggest worries any business owner has is the neverending task of
staying on-pace with the demand for your product.
Out
of fear, owners will invest too heavily in things such as too high rent, too
many laptops/desktops, and other utilities you may find in a common workplace.
Q.6
Write short notes on :
a. Public
deposits.
Answer:
Public Deposits
One of the important sources of finance to trading and
manufacturing companies in India has been public deposits. Generally companies
opt for this method of financing rather than debenture or debt financing since
they offer attractive rates of interest.
Advantages
of Public Deposits
Companies find the public deposits as an
b.
Marketable Securities
Answer: Marketable securities are unrestricted short-term
financial instruments that are issued either for equity securities or for debt
securities of a publicly listed company. The issuing company creates these
instruments for the express purpose of raising funds to further finance
business activities and expansion. Governments also issue debt securities of
this type in the form of T-bills, used for funding of public projects and
expenditures.
c. ABC
Analysis
Answer:
Every single item we order
does not have equal value. Some parts cost more. Some are used more frequently.
Some are both. ABC inventory analysis helps categorize those items so we can
understand which ones should receive our full attention.
As the name
suggests, this inventory categorization technique groups your inventory in
three buckets: A, B, & C.
·
A’ items are the most important to an organization. This material should
receive your full focus due to its high usage rate or a high price (or both
Dear
students get fully solved assignments
Send
your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
Call
us at : 08263069601
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