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business
intermediate financial management
Taxmans Fundamentals Of Financial Management 14th Edition R.P. Rustagi - Solutions
Which of the following is not a technique of receivables management?(a) Funds Flows Analysis,(b) Ageing Schedule,(c) Days sales outstanding,(d) Collection Matrix.
Bad debt cost is not borne by factor in case of:(a) Pure Factoring,(b) Without Recourse Factoring,(c) With Recourse Factoring,(d) None of the above.
Ageing schedule incorporates the relationship between :(a) Creditors and Days Outstanding,(b) Debtors and Days Outstanding,(c) Average Age of Directors,(d) Average Age of All Employees.
Which of the following is not an element of credit policy?(a) Credit Terms,(b) Collection Policy,(c) Cash Discount Terms,(d) Sales Price.
5 Cs of the credit does not include:(a) Collateral,(b) Character,(c) Conditions,(d) None of the above.
The following data pertain to a shop. The owner has made the following sales forecasts for the first 5 months of the coming year.January 40,000 February 45,000 March 55,000 April 60,000 May 50,000 Other data are as follows :(a) Debtors and creditor’s balances at the beginning of the year are
The following data is collected by SRG Iron & Steel Co.for first four months of the next financial year :Month 1 Month 2 Month 3 Month 4 Sales 15,000 24,000 36,000 24,000 Purchase of Assets 1,200 2,000 4,000 —Raw materials 14,000 15,000 16,000 17,000 Expenses 2,000 4,000 4,000 8,600
Ashok Ball Bearings Ltd. is preparing the cash budget for the first half of year 2016. The projected sales and other items are given hereunder :MONTHS (Figures in )January February March April May June Projected Sales 72,000 97,000 86,000 88,000 1,05,000 1,10,000 Goods Purchased 25,000 31,000
Prepare the cash budget for the three months ending 30th June, 2016 from the information given below :(a)Month Sales Materials Wages Overheads February 14,000 9,600 3,000 1,700 March 15,000 9,000 3,000 1,900 April 16,000 9,200 3,200 2,000 May 17,000 10,000 3,600 2,200 June 18,000 10,400
Based on the following information prepare a cash budget for ABC Ltd.1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Opening cash balance 10,000 Collection from customers 1,25,000 1,50,000 1,60,000 2,21,000 Payment :Purchase of materials 20,000 35,000 35,000 54,200 Other expenses 25,000
Prepare monthly cash budget for six months beginning April, 2016 on the basis of the following information:(i) Estimated monthly Sales are as follows :January 1,00,000 June 80,000 February 1,20,000 July 1,00,000 March 1,40,000 August 80,000 April 80,000 September 60,000 May 60,000 October
A Ltd. started the business on 1-1-2016 with a capital of 40,000. The estimated sales and purchases for the next 6 months are as follows :(Figures in )Particulars January February March April May June Purchases 24,000 40,000 48,000 48,000 52,000 48,000 Sales — 32,000 60,000 68,000 68,000
Miller-Orr Model of cash management is more realistic than Boumol’s Model ? Explain.
Explain the ‘non-synchronization of cash flows’ and ‘short costs’ as factors in determining cash needs.[B.Com.(H.), D.U. 2010]
Define float. Distinguish between payment float and collection float. What is the objective in float management ?[B.Com.(H.), D.U. 2014]
What are the factors affecting the choice of marketable securities?
Explain and discuss the role of marketable securities in cash management.
“Cash budget is an important technique of cash management”.Explain. What are the different methods of preparing the cash budget?
Discuss the Miller-Orr model for determining the cash balance for the firm. [B.Com.(H.), D.U., 2013, 2018]
Explain the Baumol’s model of cash management.[B.Com.(H.), D.U., 2011, 2012, 2017]
What are collection float and disbursement float ?
“The need for maintaining cash balance arises from the non-synchronization of the inflows and outflows of cash”.Elucidate.
“Efficient cash management will aim at maximizing the availability of cash inflows by decentralizing collections and decelerating cash outflows by centralizing the disbursements”?Discuss and explain.
What are the factors affecting the cash needs of a firm?[B.Com.(H.), D.U. 2016]
What are the objectives of cash management?
Write short notes on :(a) Concentration banking. [B.Com.(H.), D.U. 2006](b) Lock-box system. [B.Com.(H.), D.U. 2006, 2013](c) Motives for holding cash. [B.Com.(H.), D.U. 2013](d) Playing the Float.
Marketable securities are primarily :(a) Equity shares(b) Preference shares(c) Fixed deposits with companies(d) Short-term debt investments.
Basic characteristic of short-term marketable securities :(a) High Return(b) High Risk(c) High Marketability(d) High Safety
Which of the following is not considered by Miller-Orr Model ?(a) Variability in cash requirement(b) Cost of transaction(c) Holding cost(d) Total annual requirement of cash.
Baumol’s Model of Cash Management attempts to :(a) Minimise the holding cost(b) Minimization of transaction cost(c) Minimization of total cost(d) Minimization of cash balance
Which of the following is not true of cash budget ?(a) Cash budget indicates timings of short-term borrowing(b) Cash budget is based on accrual concept(c) Cash budget is based on cash flow concept(d) Repayment of principal amount of law is shown in cash budget.
Which of the following is not an objective of cash management?(a) Maximization of cash balance(b) Minimization of cash balance(c) Optimization of cash balance(d) Zero cash balance.
Float management is related to :(a) Cash Management(b) Inventory Management(c) Receivables Management(d) Raw Materials Management.
Miller-Orr Model deals with :(a) Optimum Cash Balance(b) Optimum Finished goods(c) Optimum Receivables(d) All of the above.
Cash required for meeting specific payments should be invested with an eye on :(a) Yield(b) Maturity(c) Liquidity(d) All of the above.
Which of the following should be reduced to minimum by a firm?(a) Receipt Float(b) Payment Float(c) Concentration Banking(d) All of the above.
The Transaction Motive for holding cash is for :(a) Safety Cushion(b) Daily Operations(c) Purchase of Assets(d) Payment of Dividends.
Concentration Banking helps in :(a) Reducing Idle Bank Balance(b) Increasing Collection(c) Increasing Creditors(d) Reducing Bank Transactions.
Difference between the bank balance as per Cash Book and Pass Book may be due to :(a) Overdraft(b) Float(c) Factoring(d) None of the above.
Cheques deposited in bank may not be available for immediate use due to :(a) Payment Float(b) Receipt Float(c) Net Float(d) Playing the Float.
Which of the following is not a motive to hold cash?(a) Transactionary Motive(b) Precautionary Motive(c) Capital Investment(d) None of the above.
Cash Budget does not include :(a) Dividend Payable(b) Capital Expenditure(c) Issue of Capital(d) Total Sales Figure.
Stapler Kanga Ltd. receives cash at gradual and steady rate of 3,50,000 p.a. The cash can be invested by the company to give a return of 12% p.a. However, every time, it invests, it has to meet transaction expenses of 50 plus 1% brokerage of the amount invested. Another investment broker has
M/s. PQR and Co. have approached their bankers for their working capital requirement, who has agreed to sanction the same by retaining the margins as under :Raw Materials 20%Stock-in-process 30%Finished goods 25%Debtors 10%From the following projections for next year you are required to work out
From the following information presented by a manufacturing company, prepare a working capital requirement forecast for the coming year : Expected monthly sales of 32,000 units @ 10 per unit. The anticipated ratios of cost to selling prices are :Raw Materials 40%Labour 30%Budgeted overheads
From the following information, prepare a statement showing estimated working capital requirement :(i) Projected Annual sales 26,000 units.(ii) Selling price per unit 60.(iii) Analysis of selling price :Material 40%; Labour 30%; Overheads 20%; Profit 10%.(iv) Time lag (on average)Raw materials in
You are required to prepare a statement showing the working capital needed to finance a level of annual activity of 52,000 units of output. The following information are available :Elements of cost per unit Raw Materials 8 Direct Labour 2 Overheads 6 Total cost 16 Profit 4 Selling price 20 Raw
“Depreciation should be ignored while determining the working capital need for a firm.” Why?
Differentiate the working capital requirement based on total cost basis and cash cost basis.
How the value of work-in-progress can be estimated ?What are the relevant factors?
Discuss the method of estimation of working capital requirements based on sales.
Explain the factors considered while determining the need for working capital. [B.Com.(H.), D.U., 2009, 2012]
Grow More Ltd. is presently operating at 60% level, producing 36,000 units per annum. In view of favourable market conditions, it has been decided that from 1st January 2014, the Company would operate at 90% capacity The following informations are available :(i) Existing cost-price structure per
AB Ltd. provides the following particulars relating to its working:(i) Cost/Profit per unit:Raw Material Cost 84 Direct Labour Cost 36 Overheads (All Variable) 36 Total Cost 156 Profit 44 Selling Price 200(ii) Average Amount of Back up Stock :Raw Material 1 month Work-in-Progress (50% Complete)
The management of Royal Industries has called for a statement showing the working capital to finance a level of activity of 1,80,000 units of output for the year. The cost structure for the company’s product for the above mentioned activity level is detailed below :Cost per unit Raw Material 20
Discuss various sources of working capital finance.
What is management of working capital? State briefly the repercussions if a firm has :(i) Paucity of working capital.(ii) Excess of working capital.
Working Capital Management deals with decisions regarding the appropriate mix of current assets and current liabilities. Elucidate.
“Merely increasing the working capital of the firm does not necessarily reduce the riskiness of the firm, rather the composition of current assets is equally important. Comment.
“Length of operating cycle is the major determinant of working capital needs of a business firm.” Explain.
Explain the costs of liquidity and illiquidity.
“Liquidity and profitability are competing goals for the finance manager”. Comment. [B.Com. (H.), D.U., 2013]
Is the “Aggressive approach” to working capital financing a good proposition ? What may be the consequences ?
What is “Conservative Approach” to working capital financing? How is it different from “Hedging Approach” ?
What are the different approaches to financing of working capital requirements ? [B.Com. (H.), D.U., 2013]
Distinguish between the permanent and temporary working capital.
Explain the risk-return trade-off of current assets financing.Do you recommend that current assets be financed entirely from short-term financing ? Give reasons.
Should a firm finance its working capital requirements only with short term financing? If not, why?
Explain the factors having a bearing on working capital needs. [B.Com.(H.), D.U., 2012, 2016]
Explain and illustrate the profitability liquidity trade-off in working capital management.
What is the significance of working capital for a manufacturing firm ? What will be the consequences of shortage and excess of working capital ?
Explain how working capital management policies affect the profitability liquidity for the firm.
How would you assess the working capital requirements for seasonal industries ? What are the special considerations to be noted for?
Explain the importance of working capital management.What are the techniques that are used for planning and control of working capital ?
What do you mean by working capital management ?What are the elements of working capital management ?
State the areas which you consider would require the particular attention of the management for effective working capital management.
Write short notes on :— Adequacy of working capital.— Operating cycle concept. [B.Com. (H.), D.U., 2014]— Depreciation as a source of working capital.
Current liabilities are those obligations which are generally to be discharged in :(a) 1 month,(b) 1 year,(c) 1 week,(d) 1 day.
Which of the following is classified as Current Liability ?(a) Inventory,(b) Marketable Securities,(c) Provision for Tax,(d) Investments.
Working Capital Management involves financing and management of(a) All Assets,(b) All Current Assets,(c) Cash and Bank Balance,(d) Receivables and Payables.
Permanent Working Capital :(a) Includes Fixed Assets,(b) Is minimum level of Current Assets,(c) Varies with seasonal pattern,(d) Includes Equity Capital.
Operating Cycle is equal to Inventory Conversion Cycle Plus :(a) Receivable Conversion Period,(b) Creditors Deferral Period,(c) (a) Minus (b)(d) (a) Plus (b).
Operating Cycle is a technique of :(a) Working Capital Management,(b) Receivables Management,(c) Inventory Management,(d) Creditors Management.
Deferral Period refers to the credit period allowed by :(a) Creditors,(b) Debtors,(c) Bank holders,(d) Shareholders.
Working Capital is defined as excess of :(a) Current Assets Over Capital,(b) Current Liabilities over Capital,(c) Current Assets over Current liabilities,(d) Share capital over Resources.
Which of the following is not included in Operating Cycle ?(a) Fixed Assets Level,(b) Raw Materials Stock,(c) Finished Goods Stock,(d) Creditors Payment Period.
Management of Working Capital deals with :(a) Short-term Liquidity,(b) Long-term Liquidity,(c) Cash Balance,(d) Issue of Share capital.
Gross operating cycle is defined as :(a) Equal to accounting period(b) One calendar year(c) Either of (a) or (b)(d) None of (a) and (b)
Which of the following is a determinant of working capital ?(a) Production Schedule(b) Production Capacity(c) Depreciation Policy(d) Tax Policy
Find out the Cash Conversion Period if Receivable Conversion Period is 40 days, Deferral Period in 30 days and Inventory Holding Period in 25 days :(a) 30 days(b) 25 days(c) 35 days(d) 45 days
Net Operating Cycle increases if :(a) More raw materials are purchased(b) Payment to creditors is made earlier(c) Goods are sold in shorter period(d) Both (a) and (b).
Net Operating Cycle is equal to :(a) GOC – DP(b) GOC + DP(c) RMCP + RCP(d) RMCP – RCP
Which of the following is not a feature of current assets?(a) Shorter liquidity(b) Longer life(c) Controllable(d) Relevant
Which of the following does not usually affect working capital requirement ?(a) Operating leverage(b) Financial leverage(c) Both of (a) and (b)(d) None of (a) and (b)
Operating cycle of a firm can be shortened by(a) Increasing credit period to customers(b) Increasing stock of raw material(c) Increasing working-in-progress period(d) Increasing credit period from suppliers.
Positive Net Working Capital implies that :(a) Liquidity position is not comfortable(b) Current Ratio is less than one(c) Current Assets are partly financed out of long-term sources(d) All of the above.
Negative Net Working Capital implies that :(a) Long-term funds have been used for long-term assets(b) Long-term funds have been used for current assets(c) Short-term funds have been used for fixed assets(d) Short-term funds have been used for current assets.
In which of the following, the permanent working capital is financed by long-term sources of funds?(a) Hedging Approach(b) Aggressive Approach(c) Conservative Approach(d) All of the above.
Hedging Approach to Working Capital deals with :(a) Financing of CA(b) Financing of CL(c) Level of CA(d) Level of CL
Permanent Working Capital is also known as :(a) Gross Working Capital(b) Net Working Capital(c) Total Current Asset(d) None of the above.
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