Ms-41 Question bank (12)
Ms-41 Question bank
Ms-41 dec 2009
Written by sales@mbaonlinepapers.com sales@mbaonlinepapers.comMS-41 Dec-2009
MS-41 : Working capital management
1. As the difference between the cost of short term financing and long term financing becomes smaller, which financing plan aggressive as conservative becomes more attractive ? Would the aggressive or conservative approach be preferable if the costs were equal ? Why ?
2(a) Explain the role of Cash Forecasting in cash management. Describe briefly any two methods of cash forecasting.
(b) Explain the Miller-Orr model with the help of a suitable example.
3. Discuss the different methods of creating a charge over the assets of the borrower which could be used by banks for safeguarding their interests.
4. Distinguish between the following :
a) Permanent working capital and variable working capital.
b) Options and warrants.
c) VED Analysis and F-S-N Analysis.
d) Public deposits and certificate of deposits.
5. Alpha company's present annual sales amount to Rs. 30 lacs at sale price of Rs. 12 per unit. Variable costs are Rs. 8 per unit and fixed costs amount to Rs. • 2.50 lacs per annum. Its present credit period is one month which is proposed to be extended to eithër 2 or 3 months, whichever appears to be more profitable. The following estimates are made for the purpose :
|
Credit policy |
1 month |
2 months |
3 months |
|
Increase in sales (%) |
Nil |
8 |
30 |
|
% of bad debts to sale |
1 |
3 |
6 |
Fixed cost will increase by Rs. 50,000 annually after any increase in sales above 25% over the present level. The company requires a pre tax return on investment of at least 20% for the level of risk involved. What will be the most rewarding credit policy in case of Alpha company under the above circumstances ?
6. (a) What do you understand by Commercial Paper ? Explain the important guidelines
issued by Reserve Bank of India for the issuance of Commercial Paper.
(b) What is the meaning of the term factoring ? Explain its significance and mechanism and distinguish between with recourse factoring from without recourse factoring.
7. What do you understand by Trade Credit ? Is Trade Credit a free of cost source of financing working capital requirements ? Give reason. Discuss the different factors that determine the availability of Trade Credit to a firm.
8. Write short notes on any four of the following :
a) Decision tree model
b) Selective credit controls
(c) Gross profit ratio
d) Baumol model
e) C's to determine creditworthiness of a customer
(f) Euro Currency Market
Ms-41 dec 2010
Written by sales@mbaonlinepapers.com sales@mbaonlinepapers.comMS-41 Dec-2010
MS-41 : Working capital management
Solved papers of MS-41 From mehta solutions
Ms-41 dec 2011
Written by sales@mbaonlinepapers.com sales@mbaonlinepapers.comMS-41 Dec-2011
MS-41 : Working capital management
1. The cost sheet ABC Ltd. provides the following data.
Cost per unit
Raw material Rs. 50
Direct Labor 20
Overheads
(including depreciation of Rs. 10) 40
Total cost 110
Profits 20
Selling price 130
Average raw material in stock is for one month. Average material in work-in-progress is
for half month. Credit allowed by suppliers; one month; credit allowed to debtors : one month Average time lag in payment of wages : 10 days ; average time lag in payment of overheads 30 days.
25% of the sales are on cash basis. Cash balance expected to be Rs. 1,00,000. Finished goods lie in the warehouse for one month.
You are required to prepare a statement of the working capital needed to finance a level of the activity of 54,000 units of output. Production is carried on evenly throughout the year and wages and overheads accrue similarly. State your assumptions, if any, clearly.
2. Explain with examples the ratios which can be used for assessing :
(a) Efficiency of working capital
(b) Structure of working capital
(c) Liquidity of working capital elements
3. (a) With help of illustrations explain risk return trade off in working capital management.
(b) Explain the various approaches a company may follow to arrive at appropriate level of investment in current assets.
4. Management of inventory must meet two-opposing objectives. Discuss them. How is balance brought between the two objectives, Illustrate with examples.
5. Explain the following sources of working capital finance :
(a) Inter-corporate loans
(b) Company deposits
6. Explain the following cash management models :
(a) Baumol model
(b) Miller and Orr model.
7. (a) What are credit standards that are used in credit policy decision ?
(b) A company has an average collection period of 60 days with sale of 2 lakh units @ Rs, 30 with variable cost of Rs. 20 and average cost per unit Rs. 25. The company is not offering any cash discount and all sales are on credit. It is considering a proposal given by its consultant to allow a 2 percent discount for payments within 10 days. It will increase sales by 2500 units and average collection period will be reduced by 15 days.
Incidently working capital needs will increase by Rs. 1 lakh. If the company makes half of the sales at cash discount and desires a return of 20 percent on investment, should the proposal of consultant be accepted ?
- Explain the features of different forms of bank credit prevailing in India. Distinguish between pledge and hypothecation.
Ms-41 Question bank