M.B.A. DEGREE EXAMINATION, APRIL 2016
WORKING CAPITAL MANAGEMENT
(CBCS 2012 onwards)
Time 3 Hours Maximum 75 Marks
Part A 3 15)
Answer all questions.
1. What is net working capital?
2. Mention the objectives of cash management.
3. Explain the meaning of the term ageing schedule.
4. Why should inventory be held by a firm?
5. What is factoring?
Part B 10 50)
Answer all questions choosing either or
6. Enumerate the factors deciding the working capital
requirements of a firm.
Or
Rose Ltd. is engaged in customer retailing. You are
required to estimate its working capital
requirements from the following data:
Sub. Code
641311
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Projected annual sales Rs. 9,00,000
Percentage of net profit 10 cost of sales 20%
Average credit allowed to debtors 1 month
Average credit allowed by creditors 2 months
Average stock carrying 2 2
1 months.
(in terms of sales requirements)
Add to allow for contingencies.
7. Explain the Baumol model of cash management.
Or
The following forecasts are provided in respect of
Ellis Ltd. for the year 2009:
Rs.
Sales 13,50,000
Purchases 9,00,000
Cost of goods sold 9,15,000
Average debtors 1,50,000
Average creditors 80,000
Average stock 1,52,000
Find out the cash operating cycle given that all
sales and purchases are made on credit.
8. What are credit terms? Explain the role of credit
terms in a credit policy.
Or
A company has sales of Rs. 20,00,000 Average
collection period is 50 days, bad debt losses are
of sales and collection expenses are Rs. 20,000.
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The cost of funds is 15% p.a. The company has two
alternative collection programmes.
I II
Average collection period
reduced to
40 days 30 days
Bad debt losses reduced to of sales of sales
Collection expenses Rs. 40,000 Rs 60,000
Evaluate which programme is viable.
9. Discuss the various stock levels under inventory
management.
Or
The annual demand for a product is 6,400 units.
The unit cost is Rs. 6 and inventory carrying cost
per unit per annum is 25% of the average inventory
value. If the cost of procurement is Rs. 75,
determine
EOQ;
Number of orders per annum; and
Time between two consecutive orders.
10. Explain briefly the different sources of working
capital.
Or
Explain the recommendations of Tandon Committee
and Chore Committee formed for regulating bank
credit.
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Part C 10 10)
Case Study Compulsory question.
11. Cost sheet of a company provides the following
particulars:
Elements of cost
Raw materials 40%
Labour 10%
Overheads 30%
The following particulars are also available:
Raw materials remain in stock for 6 weeks,
Processing time: 4 weeks
Finished goods are in stock for 5 weeks,
Period of credit allowed to debtors: 10 weeks
Lag in payment of wages: 2 weeks,
Period of credit allowed by creditors: 4 weeks
Selling price: Rs. 50 per unit,
Production in units: 1 3,000p.a.
Prepare an estimate of working capital.