'Working Capital\r'

'WORKING swellQ1. Which of the fol belittleding is the primary well-nigh objective of work uppercase? (MCQ)The digression between latest assets & adenosine monophosphate; current liabilitiesA correspondence of having crystal clear assets to ensure the ope dimensionn is unaffectedManagement of idiosyncratic works gravid componentsWorking gravid analysis victimization balances(2 marks)\r\nQ2. expect the actual proportion & adenosine monophosphate; lively proportionality using the be hapless information. (MCQ)$000Inventory 200Receivables 670Payables 235Bank loan 85Current dimension 0.37, dissipated Ratio 0.27Current Ratio 0.58, Quick Ratio 0.31Current Ratio 1.76, Quick Ratio 1.54Current Ratio 2.71, Quick Ratio 2.09(2 marks)\r\nQ3. flump Co. sold 20% of its breed on denotation for 10% profit. What allow be the exertion on the quick ratio & current ratio after the farm animal sale, if all else is liken? (MCQ)Current Ratio (Increase), Quick Ratio (Increase)Cur rent Ratio (Increase), Quick Ratio (No change)Current Ratio (No change), Quick Ratio (Increase)Current Ratio (Increase), Quick Ratio (Decrease)(2 marks)\r\nQ4. Inkle Co has receivables disorder of 8 convictions, a payables disturbance of 4.5 times and an origin turnover of 2.25 times. Calcu slow gold operational regular recurrence assuming 365 geezerhood in a category? (MCQ)46 Days81 Days127 Days162 Days(2 marks)\r\nQ5. Which of the following deuce t for each oneings atomic number 18 correct in relation to on the job(p) capital policies for a manufacturing party and a victuals retail merchant? (MRQ)A manufacturing order leave alone conduct to expend in raw physical and result in whacking add togethers to be owed to its customersA feed retailer leave alone prolong a biggish stocktaking of large receivables balanceA manufacturing phoner need no accounts receivable insuranceA food retailer will need to consider muniment centering insurance (2 marks)\r\nQ 6. Mafia Co is a manufacturing beau monde and has the following hitchs. Periods DaysReceivables collection 70Raw material turnover 42Work in progress turnover 14Finished goods turnover 42Payables pay 495334032258000What is the time it takes to complete a on the job(p) unit of ammunition? (FIB) Days(2 marks)\r\nQ7. Which of the following best describes the working capital turnover? (MCQ)It measures a alliances ability to replace its working capitalIt measures the working capital support to the revenuesIt measures the liquidity position of the beau mondeIt measures the profitableness position of the company (2 marks)\r\nQ8. Yolo Co. has the following inventories:Raw material $600Work in progress $550Finished goods $700Yolo Co has annual purchases of $5,000 with the approach of gross sales being $2,000. What are the average inventory geezerhood for Yolo Co (366 geezerhood in a year)? (FIB)23495-317500Days(2 marks)\r\nQ9. A company sells toy machine guns in the USA; it yearl y sells 15,000 guns at $60/each. It has to take on $56,000 from its customers. In how many geezerhood will the company receive all its earningss? (MCQ)10 Days23 Days63 Days98 Days(2 marks)\r\nQ10. A delay in payment to the suppliers may result which of the following? (MRQ)Future contracts with the suppliers may be disruptedA fire on late payment will be missedGoodwill in the grocery will be summationdAn add-on in the price of products as a compensation (2 marks)\r\nQ11. Which of the following is not a typical symptom of overtrading? (MCQ)A world-shattering increase in revenue A bank overdraft reaching its dress A fall in the quick ratio and the current ratio A fall in trade payables days(2 marks)\r\nQ12. A company has very spunky levels of inventory and high property balances. This is an indication of? (MCQ)Over-tradingHigh cash operating motorbike Over-capitalizationLow working capital cycle (2 marks)\r\nQ13. Select whether the following statements are true or false. (HA)An increase in sales revenue should belike to increase the level of working capital invested avowedly FALSEA profitability drop-off is an indication that the trade cycle has been increased authentic FALSEUnder-capitalization is the rapid increase in sales as compared to the invested pay avowedly FALSE(2 marks)\r\nQ14. score the following ratios in comparison to identify the over-trading problems. (P;D)A significant increase in sales Customers are paid late than their reference period Current liabilities are in overplus of Current assets WORKING CAPITAL GROWTH % QUICK RATIO % INCREASE IN RECEIVABLES(2 marks)\r\nQ15. Unto Co is an online sales company which has established its employment in the past two years. The CFO has indicated that the company has expanded its business organisation and gained a good market share in these two years only to able to conserve further they will need to manage its working capital effectively.\r\nWhich of the following actions mogul help overcome Unto Co problems? (MRQ)The shareholders will be asked to inject pay into Unto CoInventory levels should be increased by Unto CoSales of Unto Co should be withheld for some timeRetained acquire should be invested back in Unto (2 marks)\r\nQ16. An enthronisation policy is the amount of working capital investment needed for a particular company. Which of the following statement referd to a conservative policy? (MCQ)Company keeping a low level of inventory will go by an rather cash operating cycleA lengthy cash operating cycle may lead to high pay costInventory levels ; receivables should be unbroken at an optimum levelA shortsighted cash operating cycle may lead to risky business(2 marks)\r\nQ17. Kelp Co has kept its inventory levels at the minimum level from the start of the business. The business was acquired by a competitor and they continued its operation as per their previous owners. In the last three months, the company is unavailing to meet the supply dem ands due to a shortage of inventory. The new owner of Kelp Co is unable to recognize the working capital policy. Select the detach working capital policy? (MCQ) Conservative investment policyAggressive financing policyAggressive investment policyConservative financing policy(2 marks)\r\nQ18. Select the take over option. (HA) The efficient focussing of inventory ; receivables relates to a ensure investment policy TRUE FALSEIf customers pay late to a company this will increase the cash cycle TRUE FALSE(2 marks)\r\nQ19. A company ineluctably finance to invest in their assets. Select the divert asset in relation to working capital financing policy. (P;D)Assets are bought in their respective seasons Assets continue for more than a year Assets nowadays with the company at any given up time of the year NON- live ASSETS PERMANENT CURRENT ASSETS FLUCTUATING CURRENT ASSETS(2 marks)\r\nQ20. Which statement best reflects a conservative working capital finance policy? (MCQ)More short-ter m finance is use because its riskyMore semipermanent finance is employ because it improves liquidityMore short-term finance is used to purchase inventoryMore long-term finance is used to pay-off payables(2 marks)\r\nQ21. Select the following similarities in an Investment & financing working capital policy. (MRQ)The risk of product line out in the policyThe names used in each policyThe use of assets in the policyThe level of inventory in the policy(2 marks)\r\nQ22. Which of the following factors could have an influence in working capital? (MRQ)Company credit policies The future ripening prospectThe balance of liquidity & profitabilityThe nature of the companyPayable credit policies of suppliers(2 marks)\r\nQ23. Which of the following is a benefit in having a decentralized treasury department in a company? (MCQ) The duplication of workThe benefit of bulk discountingThe low-interest rate applied by the bankThe development of skills of managers (2 marks)WORKING CAPITAL (ANSWE RS)Q1. BThe difference between current assets & current liabilities (Definition)A balance of having liquid assets to ensure the operation is unaffected (Objective)Management of individual working capital components (One of the aspects of WC)Working capital analysis using ratios (One of the aspects of WC)\r\nQ2. DCurrent Ratio = [200+670] ÷ [235+85] = 2.71Quick Ratio = [670] ÷ [235+85] = 2.09\r\nQ3. AThe Quick ratio = IncreaseThe inventory sold on credit, all else being equal receivables (current assets) will increase, so the quick ratio will increase.The Current ratio = IncreaseCurrent assets include Inventory & Receivables. The inventory sold for profit, the receivables increase will be more than the decrease in inventory, the net effect will be the increase in current assets, hence ratio increased.\r\nQ4. CReceivable days= (365 ÷ 8) = 46 daysInventory days = (365 ÷ 2.25) = 162 daysPayable days = (365 ÷ 4.5) = 81 daysCash operating cycle = (46 + 162) †81 = 127 days\r\nQ5.A manufacturing company will need to invest in raw material and result large amounts to be owed to its customers (Correct)A food retailer will have large inventory with small receivables balanceA manufacturing company needs careful consideration of accounts receivable policyA food retailer will need to consider inventory management policy (Correct)Q6. 119 daysWorking Capital Cycle= (70+42+14+42) †49 = 119\r\nQ7. BQ8. 91 daysRaw material days = (600 ÷ 5,000) à 366 = 44 daysWork in progress days = (550 ÷ 2,000) à 366 = 101 daysFinished goods days = (700 ÷ 2,000) à 366 = 128 daysAverage days = (44 + 101 + 128) ÷ 3 = 91 days\r\nQ9. BSales = 15,000 à 60 = 900,000 Receivable days = (56,000 ÷ 900,000) à 365 = 23 days\r\nQ10. Future contracts with the suppliers may be disrupted (Correct)A discount on early payment will be missedGoodwill in the market will be decreasedAn increase in the price of products as a compensation (Correct)\r\nQ11. DOvertrad ing is business trying to do too overmuch too quickly with too little long-term capital. The payment period to accounts payable is likely to continue (not shorten).\r\nQ12. COver-capitalization represents an excessive investment by a business in its current assets. In the case inventory & cash balance both relate to current assets of a business.\r\nQ13. An increase in sales revenue should likely to increase the level of working capital invested TRUE A profitability decrease is an indication that the trade cycle has been increased TRUE Under-capitalization is the rapid increase in sales as compared to the invested finance TRUE\r\nQ14. A significant increase in sales Working capital harvest %Customers are paying late than their credit period % Increase in ReceivablesCurrent liabilities are in excess of Current assets Quick Ratio\r\nQ15. The shareholders will be asked to inject finance into Unto Co (Correct)Inventory levels should be managed expeditiously by Unto Co Sales of Unt o Co should be lowered not withheld completely for some timeRetained profits should be invested back in Unto (Correct)\r\nQ16. BIn a conservative policy, the inventory levels & receivables are kept high resulting longer cash operating cycles take to a need for finance via overdraft facilities. Overdraft results finance cost.\r\nQ17. CThe company kept its inventory levels at the minimum having a high risk of stockouts which indicates the Aggressive investment policy was used by Kelp Co.s previous owners.\r\nQ18.The efficient management of inventory ; receivables relates to a moderate investment policy TRUE If customers pay late to a company this will increase the cash cycle TRUE\r\nQ19.Assets are bought in their respective seasons FLUCTUATING CURRENT ASSETSAssets continue for more than a year NON-CURRENT ASSETSAssets present with the company at any given time of the year PERMANENT CURRENT ASSETS\r\nQ20. BThe conservative policy finances most fluctuating assets with long-term fin ance and finances all permanent assets with long-term finance. Resulting low risk eventually improving liquidity just now decreasing profitability.\r\nQ21. The names used in each policy are same only.\r\nQ22. All given above are the factors which can influence the working capital\r\nQ23. D\r\n'