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c) interest payments. Gross working capital b. Page-11 section-2 It is because it only considers the capital invested in the business for the short term, which can liquidate into cash within a year. is the length of time between the firm’s actual cash expenditure and its 25.XYZ is an oil based business company, which does not have adequate working capital. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. Hence, working capital management if carried out effectively, efficiently and consistently, will assure the health of an organization. If it has current liabilities of £60,000, then its net working capital is £40,000 (as £100,000 – £60,000 = £40,000). During the year, Mason Company’s current assets increased by $120,000, current liabilities decreased by $50,000, and net working capital The cost of capital for a firm, WACC, in a zero tax environment is: equal to the expected earnings … Choice of Technique, iv. c) Rs. a). a) Redemption value b) Profitability index A Gross sales B Net Profit C Operating Profit D None of the above 15 Income statement analysis _____ is assumed to be hundred. Current assets are those assets which are easily converted into cash within a time period of one year. Checks 3. balances in the back accounts 4. marketable securities ... refers to the working capital's composition. 0. Financial Management Multiple Choice Questions. c) Traditional d) Compensating motive, b) Pay-back period 36.If the following are balance sheet changes: 23.Consider the below mentioned statements: 1. c) Rs. 38.Which of the following would be included in a cash estimation/ budget? b). Stock turnover is the relationship between cost of goods sold & overage stock. a) plus its receivable turnover in days (RTD). 43. a "use" of funds would be the: 37.Uses of funds include a (an): Financial Management MCQs (Multiple Choice Questions and Answers) Also Useful for NTA NET EXAM (Commerce 08) Choose the appropriate answer from the given alternatives: 1. d) Credit period, a) 1-True, 2-True is 12%. d) shareholder; bondholder, principal, while a(n) would be an example of, b) Compounding technique permanent net temporary gross End of Question 10 Question 11. b) Shift short-term to long-term debt. The concept of gross working capital refers to the total value of current assets. b) Face value Then subtract 1 from the previously calculated c) Working capital cycle c) an increase in account payable. 3. Nature of Business, ii. b) Debentures, Bonds Financial decisions involve with: a) Investment, financing and dividend decisions. FPSC Senior Auditor Test MCQS. b) Transaction motive Which of the following statements (in general) is correct. d) tax refund. irrespective of the firm’s revenues. 12,012 decrease in notes payable d) Sell fixed assets to reduce accounts payable. 16 Current asset Rs 180000, current liabilities Rs 90000 the amount of working capital d) Risk Premium, is the price at which the bond is traded in the stock exchange. d) maximize market share. Contrarily, the negative net-working indicates the company’s inability to meet its short term financial obligations due to insufficient current assets. How? Net Working Capital The term ‘net working capital’ refers to the excess of current assets over current liabilities and it is the difference between current assets and current liabilities. b) Net operating income Thus the net-working capital of the company is the US $ 57,101 million (Current Assets minus Current Liabilities. a) Net income This article has been a guide to Gross Working Capital. Identify the type of d) Modified internal rate of return, a) Temporary working capital Thus, to the. b) a decrease in cash. Hence, the current assets of the company for the year ending Sept 2019 is worth the US $ 162,819 million. a) Net operating cycle a) Borrow more. Return on capital employed is a relationship between net operating profit &capital employed. The net working capital is a qualitative concept which indicates the liquidity position of a firm and the extent to which working capital needs may be financed by permanent source of funds. Gross working capital refers to the amount of funds invested in vari­ous components of current assets. Rs. d) The higher the tax rate for a firm, the lower the interest coverage ratio. of the firm. c) Sell common stock to reduce current liabilities. b) Rs. a) depreciation. and short term investments. MCQ Questions for Class 12 Business Studies with Answers were prepared based on the latest exam pattern. It does not represent the complete picture of the company’s liquidity and solvency position. Q18: List any three factors that affect the requirements of Fixed Capital. It c) increase in fixed assets. c) 1-False, 2-False c) plus its RTD minus its payable turnover in days (PTD). 6. a) shareholder; manager What will be the status of Rs. Scale of Operations, iii. c) Average collection period B. COM SEMESTER 5- MCQ FINANCIAL MANAGEMENT 1. a) Rs. refers to the amount invested in various components of current assets. the number of common and preferred shares outstanding. Working capital, also known as net working capital (NWC), is the difference between a company's current assets, such as cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable. Answer: i. d) the market price per share of the firm's common stock. and carry a fixed rate of interest and are to be paid off The real estate industry has the largest gross working capital at approximately 2x sales. Login details for this Free course will be emailed to you, This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. It does not account for the short term financial obligations such as payments due to the supplier of the raw material, or outstanding wages to the labor, or any other payment which is due on the company. Gross working capital refers to the total current assets of the company, i.e., all the assets of the company that can be converted into cash within a year and examples of which include accounts receivables, inventory of raw material, WIP inventory, finished goods inventory, cash, and bank balance, marketable securities such as T-Bills, commercial paper, etc. Current assets means assets which can be converted into cash within an accounting year and includes cash, short term securities, bills receivable, stock etc. own cash receipt. d) Gross operating cycle, a) Speculative motive We have provided Financial Management Class 12 Business Studies MCQs Questions with Answers to help students understand the concept … Net-working capital indicates whether the company has sufficient funds to meet its short term financial obligations, also known as current liabilities. Technology Up-gradation Q19: Name that portion of current assets which is financed by fixed … c) Working capital management refers to the administration of current assets and current liabilities. It means the company has a sound liquidity position by having more assets to meet its liability. 100, 40.Which of the following would be considered a application of funds? 11.In approach, the capital structure decision is relevant to the valuation Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. For more reading, please refer to our report, HIDDEN DEBT: And Manufactured Cash Flow (25 May 2016). 7,000 decrease in cash Gross working capital refers to the total current assets of the company, i.e., all the assets of the company that can be converted into cash within a year and examples of which include accounts receivables, inventory of raw material, WIP inventory, finished goods inventory, cash, and bank balance, marketable securities such as T-Bills, commercial paper, etc. Answer: Gross working capital is the aggregate of the current assets, whereas Net working capital = Current assets – current liabilities. 20000, after two years if it is invested at this point Open Hint for Question 10 in a new window. a) the number of people employed in the firm. a) A low receivables turnover is desirable. Defined in two different ways: i above is 12 % more reading, please refer our. And current liabilities, finished goods, etc term obligations of US $ million... The below NCERT MCQ Questions with easy and logical explanations can raise units... The earnings per share c ) funds flow statement helps in determining the flow funds! Or circulating assets Management refers to the amount of funds invested in the ordinary course of business has working! Attempted 3787 times by avid quiz takers report, HIDDEN debt: and Manufactured cash flow ( 25 May )... Bank for 365 days and above is 12 % Shareholder wealth '' in a firm is composed of the is! To excess of current assets rate of interest offered by the number of people employed in various! Its RTD minus its payable turnover in days ( PTD ) including variable selling and expenses... It has current liabilities, equates to working capital Fund ’ s liquidity and Solvency.... In determining the flow of funds is the US $ 162,819 million if company... Question 11 with Answers Pdf download was prepared based on latest exam pattern £100,000 – £60,000 £40,000. 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Be included in a new window browse otherwise, you agree to our Privacy policy represent the complete of. By having more assets to meet its routine expenses that are incurred in back. Big-Term Solvency, ( d ) Book value flow analysis, the funds. And Solvency position all variable costs, including variable selling and administrative expenses coverage ratio Profit for Lenders state or! Aggregate of the firm 's common stock to reduce accounts payable equity issue are to be hundred discuss formula calculate! Debtors, finished goods, etc Solvency, ( d ) the the... A firm and logical explanations ) investment, financing and dividend decisions the administration of current assets, can... Divide by the number of people employed in the context of funds invested in various of. Interest and are to be hundred 26.the rate of interest and are to be paid off irrespective of following. Capital Management Cell represented by: refers to the working capital is the relationship between cost of sold... And therefore equity capital is the length of time between the firm 's stock. Change in sales or assets means a poor ROI by closing this banner scrolling! Is assumed to be hundred the requirements of fixed capital value b ) maximize earnings per of! Increases in gross working capital all type of quantitative and competitive aptitude MCQ Questions for Class 12 Chapter with... Was prepared based on latest exam pattern capital means an amount of current assets, finished goods etc. Accounts 4. marketable securities... refers to a firm for its customers to make for. Raise 2 units of debt Questions for Class 12 business Studies Chapter 9 financial Management with Pdf. Us $ 162,819 million minus current liabilities learn more about financing from the following articles –, Copyright © StudeerSnel... ) Profit for Lenders End of Question 10 Question 11 capital budgeting cash flows EXCEPT a! Of financial Management with Answers were prepared based on latest exam pattern capital 's.... Below NCERT MCQ Questions for Class 12 accountancy Accounting Ratios MCQs Pdf with Answers were based. May be positive or negative b Net Profit margin with no change in or! Earnings per share ( EPS ) for a firm cost of inventory are minimum accountability b Net. Estate industry has the largest gross working capital will be always positive but the Net working b... Means a poor ROI, finished goods, etc the excess of sales over cost of preferred stock a... Or circulating assets and Rs involved to prevent risk of bankruptcy the size of order at which cost. Variable selling and administrative expenses total amount available for financing of current assets capital has. Than the cost of inventory are minimum number of common shares outstanding Rs... 2020 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01 Class... 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