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ASSIGNMENT
Course Code : MS - 41
Course Title : Working capital management
Assignment Code : MS-
41/TMA/SEM-I/2014
Coverage : All Blocks
Note : Attempt all the
questions and submit this assignment on or before 30th April , 2014 to the
coordinator of your study centre.
1.a)
Explain the concepts of Working Capital. Discuss the various factors that
affect the
requirement
of Working Capital of a business entity.
Ans
: Generally, there are two concepts of working capital i.e. gross concept
and net concept.
1.Gross
Concept Of Working Capital:
According to
gross concept, working capital refers to all the current assets and represents
the amount of funds invested in current assets. Thus, gross working capital is
the capital invested in current assets. Current assets are those assets which
can be converted into cash within the short-time period.
Gross
Working Capital = Total current assets
In this way,
gross working capital refers to the firm's investment in current assets. Gross
working capital represents total of current assets which includes cash in hand,
cash at bank, inventory, prepaid expenses, bills receivable etc.
b)
Explain the distinguishing features of matching, conservative and aggressive
strategies for financing working capital with the help of illustrations. Under
which circumstances each of these are suitable?
Ans
: Aggressive Working Capital:
An aggressive
working capital policy is one in which you try to squeeze by with a minimal
investment in current assets coupled with an extensive use of short-term
credit. Your goal is to put as much money to work as possible to decrease the
time needed to produce products, turn over inventory or deliver services.
Speeding up your business cycle grows your sales and revenues. You keep little
money on hand, cut slow-moving inventory and unnecessary supplies to the bone
and stretch out your bill payments for as long as possible. The one payment you
cannot delay is interest -- your creditors can sue you, force you into
bankruptcy
2. Why do firms hold cash and marketable
securities? Discuss the critical variables of Cash flow forecasting and the
different forecasting approaches of cash flow
Ans
: Why do firms hold cash and marketable
securities?
In my opinion
the reasons a firm would wish to hold cash or marketable securities all have to
do with a necessity for liquidity.
Some firms need
to have a certain percentage of liquidity because of the regulations that their
company operates under in the market like banks. Banks are regulated to the
point that they need a certain amount of money to continue operations if some
of their loans go bad. This requirement is established by the FDIC and they
have to keep a certain level of liquidity in order to operate. Other firms need
a certain level of liquidity so that they can operate from month to month, to
pay employees, to pay interest costs, and to pay
3. Explain the features of different forms of
bank credit prevailing in India. Distinguish between pledge and
hypothecation. Discuss the various
methods of creating charge over the assets of the borrower in favour of the
lender bank. Distinguish between Legal Mortgageand Equitable Mortgage.
Ans
: Features of different forms of bank
credit prevailing in India:
Due to the
unequal distribution of wealth, India has arrived at a situation where the
affluent class gets richer and richer and the underprivileged becomes poorer.
To bridge this financial gap and to satisfy their day to day requirements, Bank
plays a vital role by offering various loans to the finance seekers. Hence
every borrower should have prior knowledge on the various Bank Loans in India,
which are eligible for meeting their financial objectives. Personal loans ,
home loans and various types of credit cards are available there.
Distinguish
between pledge and hypothecation:
Q.
4. What is the significance of Inventory control? Discuss the different models
of inventory management.
Ans
: Significance of Inventory control :
The following
discussion briefly and lucidly covers all the above-mentioned objectives,
benefits or importance of inventory control.
1.
Protects from fluctuations in demand
Many a times,
the demand forecast of a product
5. From the following details you are required
to make an assessment of the average amount of working capital requirement of
Hindustan Ltd.
|
Particulars
|
Average
period of credit
|
Estimate
for the Ist year
Rs.
|
|
Purchase
of Material
|
6
weeks
|
26,00,000
|
|
Wages
|
1
½ weeks
|
19,50,000
|
|
Overheads:
|
|
|
|
Rent,
Rates, etc.
|
6
month
|
1,00,000
|
|
Salaries
|
1
month
|
8,00,000
|
|
Other
overheads
|
2
months
|
7,50,000
|
|
Sales
|
cash
|
2,00,000
|
|
Credit
Sales
|
2
months
|
60,00,000
|
|
Average
amount of stocks and works-in-progress
|
|
4,00,000
|
|
Average
amount of undrawn profit
|
|
3,00,000
|
It
is to be assumed that all expenses and income were made at even rate for the
year.
Ans
:
Dear students get fully solved
assignments
Send your semester &
Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601
(Prefer mailing. Call in emergency )
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