M.B.A. DEGREE EXAMINATION, NOVEMBER 2017.
Third Semester
WORKING CAPITAL MANAGEMENT
(CBCS 2016 onwards)
Time 3 Hours Maximum 75 Marks
Part A x 3 15)
Answer all questions.
All questions carry equal marks.
1. What do you mean by Gross working capital?
2. What is optimum cash level in an organisation?
3. What are bad debts? How do you recover them?
4. Identify the types of inventory.
5. List the sources of working capital.
Part B x 10 50)
Answer all questions choosing either or
All questions carry equal marks.
6. What are the determinations of working capital?
Or
Sub. Code
641311
RW-788
2
Sp4
What is the length of operating cycle? The cash
cycle? Assume 365 days in a year.
2016 2017
Sales 80 Inventory 9 12
Cost of goods sold 56 Accounts receivables 12 16
Accounts payables 7 10
7. Explain cash collection and disbursement methods.
Or
Zeta requires Rs. 1.5 million in cash for its
transactional needs. Zeta can sell its marketable
securities which at present earn 16% interest
annually. The conversion of the marketable
securities in to cash entails a fixed cost of Rs. 500
per transaction. What is the optional size of
conversion?
8. What factors do you consider in formulating a credit
policy?
Or
A company sales are Rs. 100 million. The average
collection period is 30 days. Variable cost to sales
ratio is 0.75. Cost of capital is 14 per cent Bad debt
ratio is 0.4. Tax rate is 30 percent. The company is
planning to relax its collection effort. The sales are
expected to go up by Rs. 10 million and increase
collection period to 40 days. It raises bad debt ratio
to 0.05. What is the effect of relaxing the collection
effort on residual income?
9. Explain the methods of monitoring and controlling
inventories.
Or
RW-788
3
Sp4
Modern enterprises required 90,000 units of a
material annually. It costs Rs. 3 per unit. The cost
per purchase order is Rs. 300. Inventory carrying
cost is 20 per cent per year. Find EOQ. If supplier
offers discounts as given under, what is optional
order quantity.
Order quantity Discount
4500-5999 2
6000 and above 3
10. Identify the recommendations of Tandon and chore
committee and discuss their implications to
management of working capital.
Or
What are the merits and demerits of different
sources of working capital?
Part C x 10 10)
Case study Compulsory question
11. The following information relates to XYZ company
Rs.
Sales (at two months credit) 3,60,000
Materials consumed (two months credit) 9,00,000
Wages paid (monthly is arrear) 7,20,000
Manufacturing expenses outstanding at the end of
the year (cash expenses paid one month is arrear)
80,000
Administrative expenses, paid as above 2,40,000
Sales expenses (paid quarterly in advance) 1,20,000
RW-788
4
Sp4
The company sells its products on gross profit of 25 per
cent counting depreciation as part of the cost of
production. It keeps one month's stock each of raw
materials, and finished goods and a cash balance of
Rs. 1,00,000. Assuming a 20% safety margin, calculate
the requirements of working capital of the company on
cash cost basis. Ignore work in process.