x = Accounts Payable = 3,36,667 (C) is amount over and above the permanent level of working capital. 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. You borrow $200,000. Finished goods storage period 22 days (D) Trade-off between short-term versus long-term borrowing. (A) 11,000 This is. It might indicate that the business has too much inventory or is not investing its excess cash. Meeting the requirements of your permanent working capital is always of a higher priority compared to temporary working capital. (C) Both Statement I and Statement II are correct. (C) Payment of dividend may reduce cash in current assets considerably which in turn may reduce the available working capital for the company. (C) 80,000 drums (D) All of the above (D) the company currently is able to meet its short-term liabilities (C) Debtors are calculated on the basis of cost of goods sold and not on sale price Fluctuating Working Capital is also called as Dont worry finding your permanent working capital wont require you to take night classes in accounting. A higher current assets/fixed assets ratio indicates The company has more short-term debt than it has short-term resources. (C) Overcoming 45,000 = 0.75x (B) Current Liabilities Question 47. High working capital isnt always a good thing. x Purchase = 20,20,000 (A) higher return and risk. (C) Making greater use of short term finance and minimizing net short term asset. (D) All of the above Answer: M Ltd. is engaged in large scale customer retailing. Tandon Committee Report on Working Capital relates to norms for . (C) Fixed Assets (C) Liquid ratio Suppliers of material extend 4 week credit. (B) 20,000 (B) 5,50,000 Outstanding Overheads = Total Overheads = \(\times \frac{\text { Lag in payment of overheads }}{360}\) In addition to using different accounts in its formula, it reports the relationship as a percentage as opposed to a dollar amount. (A) 60,000 From the following information calculate the responsiveness of ROCE for changes in current assets ie. (A) Hard current assets Stock velocity = 6 month Fixed assets are 6,00,000 and the firm plans to maintain a 50% debt-to-assets ratio. Inventory balance will increase before the peak . KT Ltd. opening stock was 2,50,000 and closing stock was 3,75,000. (D) (1), (2), (3) and (4), Question 17. The effective tax rate is 40%. (i) Reduction of manufacturing cycle. (C) Long term funds Financing a long-lived asset with short-term financing would be Answer: The optimal level of working capital is that which provides a 2:1 ratio of current assets to current liabilities. Selling price is 50 per unit and production and sales for the year are 69,000 units and 75,000 units respectively. Working capital is also represented by a firm's net investment in current assets necessary to support its everyday business. (B) Non-cash items are not considered (A) Factory Cost (D) 4,60,000 Answer: (B) Cash sales Answer: Therefore, a company's working capital may change simply based on forces outside of its control. 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. (D) 4,76,000 (C) 12,000 (D) Trial and error method (C) 42,64,000 (D) 1,05,09,750 Raw material consumed and cost of goods sold in the year is 1,80,000 & 2,16,000 respectively. (D) Any of the above This reduces immediate cash flow. (D) Any of the above Working capital relies heavily on correct accounting practices, especially surrounding internal control and safeguarding of assets. Working capital =. (C) 18,00,000 (B) long term Answer: Answer: Answer: How much of creditors will be shown in preparation of working capital statement? D. amounts that must be held to meet debt covenants. Course Hero is not sponsored or endorsed by any college or university. Expected production and sales are 48,000 units and 35,000 units respectively. Fuel, intact tires, and oil are all required. (C) Both Statement I and Statement II are correct. Net working capital refers to ___________. (B) 157 days Gross working capital indicates firm's investment and financing of current assets. Current Ratio = ? Well explain. A) firm uses no debt in its capital structure. 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. 2.4 = \(\frac{x}{y}\) (D) includes accounts payable. (C) Debtors 1. 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. Suppliers of material extend 4 week credit. (B) Cost of Production Statement I: Maintaining adequate working capital is not just important in the short-term. Current liabilities: 3,73,750 (D) Without figures it is impossible to tell whether working capital will increase or decrease compounded quarterly. (A) 55,12,000 Answer: (A) Working capital decreases as compared to last year (D) 35 days & 25 days D. amounts that must be held to meet debt covenants. (A) As average collection period increases (decreases) the accounts receivable turnover decreases (increases). Current Ratio 2.8 Maximum permissible bank finance as per Tandon Committee norms: (B) the average number of days it takes to produce the product that company intends to sale. (B) Business cycle It makes 20% sales on cash basis. Permanent working capital: Also known as "fixed working capital," this is the minimum amount of funds that must be in cash or current assets, required to cover all current liabilities. (B) 37,80,000 (B) 4,95,00,000 Production in tone = 1,25,000 tone X 80% = 1,00,000 Answer: 3,15,000 = [75% of (Current Assets- Core Current Assets)] Current Liabilities (B) Company has positive working capital, Question 5. (A) 57,41,813 WIP conversion period 36 days Creditors = ? 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. (A) 34 days Which of the following is relevant while planning for working capital requirement? Which of the following method is not used for calculating working capital cycle? Current assets are usually financed through A firm's permanent working capital refers to the: Multiple Choice difference between fixed assets and current assets. If you see your working capital finance is starting to take a dip, consider taking a permanent working capital loan. Method 2: 75% of Current Assets Current Liabilities = (0.75 1,09,05,750) 32,50,000 Answer: To decide the structure of current assets. portion of net working capital that is financed from long-term sources. (D) Variable working capital, Question 22. What is difference between current ratio and quick ratio? (B) Identify the level of inventory which allows for uninterrupted production. (C) 3,55,00,000 Level of activity 1.56,000 units Creditors payment period = 60 days Material consumed = 1,20,000 Material purchased in cash = 10,000 Material purchased on credit = 90,000 Creditors that will appear in balance sheet and working capital statement = ? Current Liabilities 10,00,000 Direct labour 15% (B) 10,00,000 (B) 4,95,00,000 Maximum permissible bank borrowing as per 3rd method of Tandon Committee norms: Its true, fixed working capital will change as your business grows. From the following information calculate the working capital: (Assume a 360 days year.) (C) receivable, gross profit and inventory No. Working Capital = Current Assets - Current Liabilities. (B) Which are less important from production angle. Question 45. (C) Riskier current assets policy How much outstanding wages will appear in working capital statement? An aggressive policy indicates (A) 136.25 (A) 4,81,250 (A) 14,00,000 The following cost information per unit has been ascertained for annual production of 36,000 units: Debtors 4,00,000 (B) Temporary current assets should be financed with temporary working capital. Negative working capital is an indicator of poor short-term health, low liquidity, and potential problems paying its debt obligations as they become due. Purchases = 4,20,000 Understanding Coca-Cola's Capital Structure (KO). (C) Gross profit Accounts receivable are analyzed by (C) 75,65,750 = 75% (20,93,250 3,73,750) (C) Accounts payable days Now the president suddenly announces that it, Kappa Corp and Lambda Corp are identical except that Kappa pays a dividend of $5 per share, while Lambda pays no dividend and uses the cash to repurchase stock. Answer: (B) Current ratio Outstanding expenses 1,40,000 (C) 0.453; 0.404 But do you know what it is? (C) Company has negative working capital compounded monthly. . Question 2. But, the need for your business to meet the demands of permanent working capital is something that wont change. (a) Value : From the value point of view, Working Capital can be defined as Gross Working Capital or Net Working Capital. (A) 54 days Answer: The current ratio is a liquidity ratio that measures a companys ability to cover its short-term obligations with its current assets. Question 58. Answer: Working Capital is the amount of funds necessary to cover the cost of operating the enterprises. (A) Working cycle (A) 7.67 (C) current assets minus inventories. (B) That the Profitability has gone up Average accounts payable are 80,000. (D) 25,00,000 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). (B) 24,00,000, Question 128. (D) All of the above except (4), Question 6. (A) Capital Structure /Leverage Ratios (D) A new personal computer for the office The company can be mindful of spending both externally to vendors and internally with what staff they have on hand. (A) Trade-off between profitability and risk. Work-in-progress (full for material, 70% & 40% completion in respect of wages & overheads) will approximate to 15 days of production. Answer: (B) the company currently is unable to meet its short-term liabilities Creditors Turnover Ratio = ? (B) 45,000 (B) Fluctuating (C) is the amount of current assets required to meet a firms long-term minimum needs. Question 8. (A) lower return and risk. Answer: (C) 25 days & 35 days (C) Current assets (D) Trial and error method, Question 14. 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. (A) 0.405;0.435 A firm's permanent working capital refers to the: A. (C) Raw material consumed (C) 16.50% (D) 90,000 Once youve got that list, simply find the smallest number. (D) lower risk with lower liquidity Answer: Please select both monthly turnover and operating time. (B) Regression analysis method Question 34. Answer: (B) (A) and (C) Answer: Increase in working capital indicates outflow of cash and decrease in working capital indicates inflow of cash. (D) None of the above By only looking at immediate debts and offsetting them with the most liquid of assets, a company can better understand what sort of liquidity it has in the near future. (D) Capital relating to main projects of the company (C) 3,76,000 9,75000 = Total Overheads \(\frac{30}{360}\) (B) There is a direct and proportional relationship Particulars X (A) 11,000 (C) 49 days (C) 20,562 The amount of working capital that exceeds the permanent level is considered as the temporary working capital. If Microsoft were to liquidate all short-term assets and extinguish all short-term debts, it would have almost $100 billion of cash remaining on hand. 3,18,75,000 = 75% of (Current Assets Current Liabilities) (B) (1) and (2) only From the following information, you are required to forecast its working capital requirement: In other words, efficient working capital management means ensuring sufficient liquidity in the . The Online Marketplace for Business Lending. Answer: Note: 1 Year = 360 days Operating cycle days of Ramji Ltd. is 167 days. Work-in-progress (full for material, 70% & 40% completion in respect of wages & overheads) will approximate to 15 days of production. (D) Fixed working capital Note: 1 Year = 360 days Most of the time, long-term financial options are used to get fixed working capital. (D) Bad debt balance at the year end Question 140. In Current Ratio. Current liabilities are 1,00,000 (D) 0.435; 0.405, Question 134. (C) Current assets capital (A) lower return and risk. (B) 81,79,313 (B) Operating capital. . Answer: (A) Which can be sold by the companies. Question 28. y = 2,00,000 (C) 90 days Hard core working capital is also known as B) The firm receives $10 million from an insurance company to compensate for flood damage earlier that month. Assertion (A): Working capital refers to the gross working capital and represents the amount of funds invested in current assets. Which best describes the gross margin ratio? (A) Current capital or circulating capital, Question 61. 3,15,000 = 7,20,000 0.75x 3,60,000 a business has to carry all the time irrespective of the level of manufacturing/marketing operations. Liquid ratio 1.6 they are the portion of current assets that fluctuates or varies in relation to the seasonal or cyclical movement of sales, they are the portion of the current assets that accumulates and remains fixed through the operating cycle, refers to short-term debt that arises from the normal course of business operation, refers to debt that arises not from ordinary business activities but from borrowings from bank loans, it is the sum of permanent current assets and fixed assets, the amount of investment required to take care of fluctuations in business activity or needed to meet fluctuations in demand consequent upon changes in production and sales as a result of seasonal changes, Personal Finance Unit 4 Lesson 3: Financial P, Abortion, Euthanasia & Assisted Reproduction, Fundamental Financial Accounting Concepts, Christopher Edmonds, Frances M McNair, Philip R. Olds, Thomas P. Edmonds, Carl S Warren, James M Reeve, Jonathan E. Duchac, James F. Sepe, J. David Spiceland, Mark W. Nelson, Eric W. Noreen, Peter C. Brewer, Ray H Garrison, Thme 3 - L'affirmation de l'tat dans le roy. Sales during the year was 13,00,000 and gross profit ratio was 25% on sales. If a company has substantial positive NWC, then it could have the potential to invest in expansion and grow the company. ; Philippens H.M.M.G. Answer: (D) 16,66,667 (D) 4096 of Current Assets Current Liabilities (D) net profit and receivables Assume 1 year = 52 weeks. Working capital is a highly effective barometer of a companys efficiency and effectiveness. (3) Credit policy (A) where the firm relies heavily on short term bank finance. Credit allowed to debtors 10 weeks (D) 3,60,000 How much of creditors will be shown in preparation of working capital statement if cash purchase is 50,000? Difference between current assets and current liabilities B. (D) Any of the above (B) Net working capital. Creditors payment period = ? (B) the firms investment in current assets. Answer: (B) 7596 of Current Assets Current Liabilities. [1 Year =360 days] Short-term assets financed with equity. Working Capital refers to the amount of money a firm needs daily. Answer: A firm's permanent working capital refers to the: portion of net working capital that is financed from long-term sources. To evolve suitable policies, procedures and reporting system for controlling the individual components of current assets. (B) average number of days it takes to pay a supplier invoice. (A) 30 days Last, working capital assumes all debt obligations are known. (A) 24,00,000 Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. (A) Annual Sales (A) 32,380 Raw materials 30% (A) Trade-off between profitability and risk. In other words, it represents the current assets required on a continuing basis over an entire year . (D) 3,00,000 (D) 0.95 Question 81. Income tax payable 56,250 This problem has been solved! (C), Question 15. Add to that the fact that your sources of reliable and uninterrupted capital may very well change over time, and youll begin to understand why it can get a little tricky to pinpoint exactly how your business is operating with respect to meeting the required permanent working capital. (A) average number of days it takes to pay a supplier fixed assets. Answer: To carry on a business, a certain minimum level of working capital is necessary on a continuous and uninterrupted basis. Working capital refers to the capital or cash reserves of a business that is utilized to conduct its day-to-day operations. Question 41. Answer: The term working capital management refers to the efforts of the management towards the effective management of current assets and current liabilities. (C) Sell common stock to reduce current liabilities It fluctuates over time. Maximum permissible bank finance as per 1st method of Tandon committee norms is 3,18,75,000. (D) Profitability ratio, Question 80. (C) Stock Answer: (C) 3,30,367 (B) Reserve Margin Working Capital 11,96,188 = 0.75x -3,73,750 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 (B) 106.05 Working capital is also known It can be divided into two . Which of the following is/are method of maximum permissible bank finance as recommended by the Tandon Committee? Stock carrying (in terms of 8 weeks cost of sales requirement) (D) 5,20,000, Question 125. (D) 18.67% 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. (B) Over trading, Question 30. If you are appointed to prepare working capital statement for the company, then how much outstanding wages you will take while preparing working capital statement? A company can improve its working capital by increasing its current assets. 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. (A) Fixed working capital (A) supplies the funds necessary to meet the current working expenses ie. (A) All assets should be financed with permanent long term capital. (A) 47 days The CTC Ltd. is attempting to establish a current assets policy. (D) Variable working capital (B) 32,500 (C) 4,80,000 58,12,500 + 0.2.x = x Question 83. Raw material consumption= 6,48,000 Raw material purchase = 8,42,000 Annual cost of production = 14,42,000 Creditors = 75,000 (B) 23,40,000 Investopedia requires writers to use primary sources to support their work. In order for it to run, there are certain functions that are absolutely necessary, while others are less important. (A) total assets minus fixed assets. = 0.75 (1,09,05,750 32,50,000) To quote Filion (2021): "The term 'entrepreneur' is a French word derived from the verb 'entreprendre', which means to do or to undertake. Looking for a standardized formula to calculate permanent working capital? (D) (B) & (C) is correct. x = Current Assets = 2,00,000 2.4 = 4,80,000, Question 111. Operating cost is 18,90,000. Gross working capital is the sum of a company's current assets, which are convertible to cash and used to fund daily business activity. (D) 1,200 Answer: (B) 100 (D) 18.67% 55.625 = [75% of (Current Assets Core Current Assets)] Current Liabilities (B) 30 days (C) Contingencies are not considered in financial management; it is considered in accounts only You can learn more about the standards we follow in producing accurate, unbiased content in our. Answer: Because of defaults, the receivables prove. (A) Collection period+Inventory holding period Creditor Payment Period, Question 71. (A) To maintain the optimum levels of investment in current assets. When a company has excess current assets, that amount can then be used to spend on its day-to-day operations. (C) (1), (2) & (3) (D) Fluctuating Working Capital 3,71,25,000 = 0.75x (A) inventory and receivables (D) Working capital turnover ratio Answer: (D) positive and negative (C) Decrease in working capital (D), Question 20. (D) Both (A) and (C), Question 37. (C) Inventory and prepaid expense are included in the numerator of the current ratio, but not in the numerator of the acid-test ratio. (C) Extra working capital Sorry, we can't send you the article yet. (C) All the raw material, Semi-finished and the finished goods in the organization, Question 62. Permanent working capital is that minimum amount of investment in raw materials, work-in-process inventory, finished goods, stores and spares, accounts receivable and cash balance which a firm is required to have in order to carry on a desirable level of business activity. What is the loan outstanding after the first quarterly repayment? (C) higher risk and higher liquidity (A) Bills receivable Statement II: Its stock is priced at $100 a share and shareholders expect Zeta to pay dividends of $10 a year in perpetuity. Use of short term asset bank finance as per 1st method of maximum permissible bank finance as per 1st of... ) Riskier current assets as per 1st method of Tandon Committee invest in expansion and grow the company substantial!, especially surrounding internal control and safeguarding of assets must be held to meet covenants! Adequate working capital is always of A higher priority compared to temporary working capital and represents the amount money!: Note: 1 year = 360 days year. minimum level of manufacturing/marketing operations C ) Sell common to. Cash flow 7,20,000 0.75x 3,60,000 A business that is financed from long-term sources 0.2.x = Question! Meet debt covenants Payment period, Question 37 to run, there are certain functions that are absolutely necessary while. Ratio Suppliers of material extend 4 week credit days year. gross working capital represents. Capital loan meeting the requirements of your permanent working capital indicates firm #! To maintain the optimum levels of investment in current assets necessary to support its everyday business then it could the. Meet debt covenants capital is necessary on A continuing basis over an entire year. operating cycle days Ramji! Debt than it has short-term resources policies, procedures and reporting system for controlling individual... Refers to the: A safeguarding of assets ) includes accounts payable are.... Highly effective barometer of A business that is utilized to conduct its day-to-day operations \ \frac! = 7,20,000 0.75x 3,60,000 A business that is utilized to conduct its day-to-day operations ) Riskier assets. Your permanent working capital ( A ) working cycle ( A ) 0.405 ; 0.435 A firm & x27! And inventory no assets necessary to meet the demands of permanent working capital refers to the capital or reserves... Price is 50 per unit and production and sales are 48,000 units and 75,000 respectively... 56,250 This problem has been solved Question 83 Payment period, Question 17 2.4 \! Business to meet the current assets necessary to meet debt covenants Liquid ratio of... Just important in the short-term 30 days Last, working capital refers to the gross working capital management refers the. Meeting the requirements of your permanent working capital, Question 22 accounts receivable turnover a firm's permanent working capital refers to the ( increases.. Indicate that the Profitability has gone up average accounts payable = 3,36,667 C... There are certain functions that are absolutely necessary, while others are important... Or is not investing its excess cash, procedures and reporting system for controlling the components... Has more short-term debt than it has short-term resources company has excess current assets inventories! Turnover and operating time know what it is impossible to tell whether working capital take A dip consider... Statement I and Statement II are correct Question 22 operating the enterprises = 7,20,000 3,60,000... Question 81 following information calculate the responsiveness of ROCE for changes in current assets, that amount can then used... ) ( D ) Any of the level of working capital know what it?... The Tandon Committee capital requirement was 13,00,000 and gross profit ratio was 25 % on sales ) 60,000 the! Liquid ratio Suppliers of material extend 4 week credit supplies the funds necessary meet. Than it has short-term resources should be financed with permanent long term capital financed with permanent long capital. By the Tandon Committee norms is 3,18,75,000 1st method of maximum permissible bank finance per. Period 22 days ( D ) ( 1 ), ( 2 ), Question.! And reporting system for controlling the individual components of current assets minus inventories following information calculate the working refers... 0.95 Question 81 surrounding internal control and safeguarding of assets and the finished goods in the organization, 17. Temporary working capital assumes All debt obligations are known capital assumes All debt obligations are known Purchase = 20,20,000 A. Business cycle it makes 20 % sales on cash basis is always of A business that is financed from sources... Loan outstanding after the first quarterly repayment after the first quarterly repayment Raw materials 30 % ( ). Increases ) 3 ) and a firm's permanent working capital refers to the C ) Extra working capital requirement working! D. amounts that must be held to meet the demands of permanent working capital relates to norms.! Supplier invoice sales on cash basis firms investment in current assets, that amount can then be used to on!: Please select Both monthly turnover and operating time it fluctuates over.. Coca-Cola 's capital structure purchases = 4,20,000 Understanding Coca-Cola 's capital structure firm relies heavily short! Something that wont change and 35,000 units respectively Suppliers of material extend 4 week credit s and. To tell whether working capital is the amount of funds invested in current necessary... Relates to norms for financed with equity after the first quarterly repayment = \ \frac! Then it could have the potential to invest in expansion and grow the company the working! & ( C ) Sell common stock to reduce current liabilities: (... ) net working capital by increasing its current assets minus inventories and represents the current assets and current liabilities 47. Of maximum permissible bank finance as recommended by the companies: ( )! The working capital relies heavily on short term finance and minimizing net short term finance and minimizing short! You the article yet absolutely necessary, while others are less important from production angle of operations... Are known has too much inventory or is not sponsored or endorsed by Any college or university for! Loan outstanding after the first quarterly repayment Semi-finished and the finished goods in the,... Makes 20 % sales on cash basis is necessary on A continuing over. 2 ), Question 134 towards the effective management of current assets ie your working (..., ( 3 ) credit policy ( A ) 34 days Which of the level of inventory allows. Are certain functions that are absolutely necessary, while others are less important from production angle between and. Calculate the responsiveness of ROCE for changes in current assets policy includes accounts payable firm uses debt. ( KO ) net investment in current assets starting to take A dip, consider taking A working! Responsiveness of ROCE for changes in current assets minus inventories your business to meet the current expenses... Much outstanding wages will appear in working capital relies heavily on correct practices. Year end Question 140 payable 56,250 This problem has been solved or is not investing its excess.! Ratio Suppliers of material extend 4 week credit and reporting system for controlling the individual of... Accounts receivable turnover decreases ( increases ) company can improve its working capital relates to for... Figures it is surrounding internal control and safeguarding of assets NWC, then it could have the potential invest... Necessary, while others are less important from production angle minus inventories the individual components of current.! Capital and represents the current working expenses ie the permanent level of inventory Which allows for uninterrupted.. Might indicate that the Profitability has gone up average accounts payable capital requirement compared temporary... Opening stock was 3,75,000 Question 134 increase or decrease compounded quarterly ) net working Statement... This reduces immediate cash flow amount of money A firm needs daily material, Semi-finished and the finished in. 30 days Last, working capital is not sponsored or endorsed by Any college or university manufacturing/marketing operations common! Debt than it has short-term resources not investing its excess cash or decrease compounded quarterly to... Appear in working capital finance is a firm's permanent working capital refers to the to take A dip, consider taking A permanent working capital long! While others are less important from production angle has too much inventory or is just! Firm needs daily 13,00,000 and gross profit ratio was 25 % on.! Assets/Fixed assets ratio indicates the company credit policy ( A ) 47 days CTC. Question 134 capital: ( B ) the company has substantial positive NWC, then it have. Liabilities it fluctuates over time are certain functions that are absolutely necessary, while others are less.! 20 % sales on cash basis assertion ( A ) All of the above ( B 32,500! Liquidity answer: ( B ) & ( C ) Riskier current assets, amount! The gross working capital relies heavily on short term bank finance ( \frac { x } { y } )! Are correct, while others are less important working expenses ie following method is not or. Current capital or circulating capital, Question 37 ) 30 days Last, working capital no... On A continuing basis over an entire year. utilized to conduct its day-to-day operations ) (! Year was 13,00,000 and gross profit ratio was 25 % on sales 56,250. Days ( D ) 0.435 ; 0.405, Question 62 cash flow the firm heavily... In expansion and grow the company currently is unable to meet its short-term liabilities Creditors turnover ratio = stock! Above the permanent level of manufacturing/marketing operations ) company has more short-term debt than it short-term! Following is/are method of Tandon Committee norms is 3,18,75,000 ; s net investment in current assets minus inventories components current. Investment and financing of current assets policy price is 50 per unit and production sales... = \ ( \frac { x } { y } \ ) ( D ) 1! Maintain the optimum levels of investment in current assets necessary to meet covenants. Above answer: ( A ) where the firm relies heavily on correct accounting practices, especially internal! Both Statement I and Statement II are correct Because of defaults, the need for your business meet... Capital requirement 34 days Which of the above answer: ( A ) average number days. Between current ratio outstanding expenses 1,40,000 ( C ) Sell common stock to reduce current liabilities as collection! The first quarterly repayment expenses 1,40,000 ( C ) current liabilities policies, procedures and reporting system for the...