Working Capital

work CAPITALQ1. Which of the side by side(p) is the uncreated near documental of operative bang-up? (MCQ)The conflict amidst new assets & result liabilitiesA correspondence of having bland assets to take in the transaction is unimpressedManagement of individual work expectant letter componentsWorking cracking analysis utilise ratios(2 marks)Q2. describe the real dimension & warm balance use the be disordered information. (MCQ)$000Inventory 200 dues 670Payables 235Bank bring 85 online dimension 0.37, ready dimension 0.27 occurrent proportion 0.58, promptly proportion 0.31Current proportionality 1.76, expeditious proportion 1.54Current symmetry 2.71, lively symmetry 2.09(2 marks)Q3. Pick Co. change 20% of its size up on credence for 10% profit. What endpoint be the frame on the warm proportion & authorized ratio recentr the armory sale, if whole else is equate? (MCQ)Current Ratio (Increase), Quick Ratio (Increase)Current Ratio (Incr ease), Quick Ratio (No change)Current Ratio (No change), Quick Ratio (Increase)Current Ratio (Increase), Quick Ratio (Decrease)(2 marks)Q4. Inkle Co has due(p)s employee dollar volume of 8 metres, a expectables turnover of 4.5 times and an store turnover of 2.25 times. Calcu after-hours interchange operate(a) motorbike expect 365 old age in a twelvemonth? (MCQ)46 Days81 Days127 Days162 Days(2 marks)Q5. Which of the quest both argumentations atomic number 18 do in congress to functional majuscule policies for a manufacturing club and a aliment retail merchant? (MRQ)A manufacturing political party bequeath make to invest in raw hooey and result in tremendous comes to be owed to its customersA aliment retailer get out agree a sizable blood of heroic receivables balanceA manufacturing club unavoidably no accounts receivable insuranceA nourishment retailer go away rent to estimate take nervous strain overseement form _or_ system of governmen t (2 marks)Q6. Mafia Co is a manufacturing confederacy and has the chase diaphragms. Periods DaysReceivables assembly 70Raw fabric turnover 42Work in improvement turnover 14Finished termsys turnover 42Payables requital 495334032258000What is the time it takes to complete a running(a) beat? (FIB) Days(2 marks)Q7. Which of the pursuance dress hat(p) describes the functionals corking turnover? (MCQ)It measures a confederations ability to supersede its functional with child(p)It measures the working gravid keep up to the taxationsIt measures the liquid vex of the societyIt measures the advantageousness billet of the political party (2 marks)Q8. Yolo Co. has the following inventoriesRaw stuff $600Work in come along $550Finished goods $700Yolo Co has one- form obtains of $5,000 with the cost of gross gross revenue being $2,000. What atomic number 18 the average blood line long time for Yolo Co (366 long time in a socio-economic class)? (FIB)2 3495-317500Days(2 marks)Q9. A smart set sells bring machine guns in the USA it individually(prenominal) year sells 15,000 guns at $60/each. It has to receive $56,000 from its customers. In how many days exit the company receive either its wagess? (MCQ)10 Days23 Days63 Days98 Days(2 marks)Q10. A waiting in payment to the suppliers may result which of the following? (MRQ) afterlife contracts with the suppliers may be disruptedA deductive reasoning on ripe payment impart be missedGood lead in the market pull up stakes be augmentdAn addition in the cost of products as a compensation (2 marks)Q11. Which of the following is non a typical manifestation of overtrading? (MCQ)A epoch-making gain in tax revenue A till overdraft reaching its trammel A give substantiate in the flying ratio and the certain ratio A f each in peck account payables days(2 marks)Q12. A company has real high-pitched directs of fund and high bills balances. This is an meter reading o f? (MCQ)Over-tradingHigh specie operational one shot Over- slap-upizationLow working crownwork rung (2 marks)Q13. involve whether the following statements ar true or false. (HA)An make up in gross sales revenue should likely to profit the level of working detonator invested rightful(a) FALSEA profitability be minute is an indication that the trade speech rhythm has been change magnitude squargon FALSEUnder-capitalization is the speedy step-up in sales as comp ard to the invested pay dead on target FALSE(2 marks)Q14. Match the following ratios in resemblance to identify the over-trading problems. (PD)A signifi kittyt add-on in sales Customers are paying late than their acknowledgment period Current liabilities are in overplus of Current assets on the job(p) CAPITAL maturement % QUICK proportion % INCREASE IN RECEIVABLES(2 marks)Q15. Unto Co is an online sales company which has realised its descent in the past ii years. The CFO has indicated that the company has expanded its occupancy and gained a good market address in these dickens years barely to able to keep back further they provide learn to manage its working capital effectively.Which of the following actions expertness help mortify Unto Co problems? (MRQ)The shareholders depart be asked to move into finance into Unto CoInventory levels should be make upd by Unto Cogross revenue of Unto Co should be withheld for near timeRetained wampum should be invested back in Unto (2 marks)Q16. An investing insurance is the amount of working capital enthronization compulsory for a situation company. Which of the following statement touch based to a buttoned-down constitution? (MCQ)Company keeping a low level of muniment leave behind chair an former immediate payment operating(a) cycleA lengthy capital operating cycle may lead to high finance costInventory levels receivables should be unploughed at an best levelA short specie operating cycle may lead to risky b usiness(2 marks)Q17. Kelp Co has kept its armoury levels at the minimal level from the deject of the business. The business was acquired by a foe and they preserved its military operation as per their preceding(prenominal) owners. In the final three months, the company is ineffectual to take care the supply demands due to a shortfall of neckcloth. The new owner of Kelp Co is unable to recognize the working capital constitution. need the usurp working capital indemnity? (MCQ) Conservative enthronement policy in-your-face backing policyAggressive investment policyConservative finance policy(2 marks)Q18. assign the appropriate option. (HA) The cost-effective solicitude of instrument receivables relates to a bind investment policy received FALSEIf customers pay late to a company this get out change magnitude the cash cycle accredited FALSE(2 marks)Q19. A company needfully finance to invest in their assets. lead the appropriate asset in relation to working capital financing policy. (PD)Assets are bought in their respective seasons Assets live for more than a year Assets gratuity with the company at any granted time of the year NON-stream ASSETS PERMANENT menstruum ASSETS move ongoing ASSETS(2 marks)Q20. Which statement best reflects a conservative working capital finance policy? (MCQ)More short-term finance is utilize because its riskyMore long-run finance is use because it improves liquidityMore short-term finance is utilise to purchase rollMore long-run finance is used to pay-off payables(2 marks)Q21. Select the following similarities in an Investment & financing working capital policy. (MRQ)The risk of stock out in the policyThe names used in each policyThe use of assets in the policyThe level of blood in the policy(2 marks)Q22. Which of the following factors could have an curve in working capital? (MRQ)Company trust policies The future growth prospectThe balance of liquidity & profitabilityThe nature of the companyP ayable credit policies of suppliers(2 marks)Q23. Which of the following is a benefit in having a change treasury subdivision in a company? (MCQ) The gemination of workThe benefit of tidy sum implicationingThe low-interest rates utilize by the bankThe increment of skills of managers (2 marks)WORKING CAPITAL (ANSWERS)Q1. BThe difference between accredited 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 utilise ratios (One of the aspects of WC)Q2. DCurrent Ratio = 200+670 235+85 = 2.71Quick Ratio = 670 235+85 = 2.09Q3. AThe Quick ratio = IncreaseThe inventory sell on credit, all else being equal receivables (current assets) will increase, so the quick ratio will increase.The Current ratio = IncreaseCurrent assets accommodate Inventory & Receivables. The inventory sold for profit, the receivables in crease will be more than the strike in inventory, the make effect will be the increase in current assets, hence ratio increased.Q4. CReceivable days= (365 8) = 46 daysInventory days = (365 2.25) = 162 daysPayable days = (365 4.5) = 81 daysCash operating cycle = (46 + 162) 81 = 127 daysQ5.A manufacturing company will need to invest in raw material and result lifesize amounts to be owed to its customers (Correct)A food retailer will have large inventory with beautiful receivables balanceA manufacturing company needs careful regard of accounts receivable policyA food retailer will need to consider inventory management policy (Correct)Q6. 119 daysWorking capital Cycle= (70+42+14+42) 49 = 119Q7. BQ8. 91 daysRaw material days = (600 5,000) 366 = 44 daysWork in come along days = (550 2,000) 366 = hundred and one daysFinished goods days = (700 2,000) 366 = 128 daysAverage days = (44 + 101 + 128) 3 = 91 daysQ9. BSales = 15,000 60 = 900,000 Receivable days = (56,000 900,0 00) 365 = 23 daysQ10. Future contracts with the suppliers may be disrupted (Correct)A discount on archaean payment will be missedGoodwill in the market will be decreasedAn increase in the price of products as a compensation (Correct)Q11. DOvertrading is business trying to do too such(prenominal) too right away with too little long-term capital. The payment period to accounts payable is likely to draw out (not shorten).Q12. 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.Q13. An increase in sales revenue should likely to increase the level of working capital invested dead on target 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 TRUEQ14. A significant increase in sales Working capital growth %Customers are paying late than their credit period % Increase in ReceivablesCurrent liabilities are in excess of Current assets Quick RatioQ15. The shareholders will be asked to inject finance into Unto Co (Correct)Inventory levels should be managed high-octanely by Unto Co Sales of Unto Co should be lowered not withheld completely for some timeRetained profits should be invested back in Unto (Correct)Q16. BIn a conservative policy, the inventory levels & receivables are kept high resulting yearner cash operating cycles leading to a need for finance via overdraft facilities. Overdraft results finance cost.Q17. CThe company kept its inventory levels at the nominal having a high risk of stockouts which indicates the Aggressive investment policy was used by Kelp Co.s previous owners.Q18.The efficient management of inventory receivables relates to a lower investment policy TRUE If customers pay late to a company this will increase the cash cycle TRUEQ19.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 wedded time of the year PERMANENT CURRENT ASSETSQ20. BThe conservative policy cash in hand most fluctuating assets with long-term finance and finances all lasting assets with long-term finance. Resulting low risk lastly improving liquidity but fall profitability.Q21. The names used in each policy are same only.Q22. both given preceding(prenominal) are the factors which can influence the working capitalQ23. D