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MS-41 Working Capital Management Question and Answer
Course: Master of Business Administration
Fully Solved: Yes
MS-41 Solved Assignment 2020 – Working Capital Management
1. Take the latest monetary policy and discuss the important highlights of this policy.
2. You are required to prepare a Cash Budget for the months of May, June and July2021on the basis of the information given below :
(a) Income and Expenditure Forecasts
March 60,000 36,000 9,000 4,000 2,000 4,000
April 62,000 38,000 8,000 3,000 1,500 5,000
May 65,000 33,000 10,000 4,500 2,500 4,500
June 58,000 35,000 8,500 3,500 2,000 3,500
July 56,000 39,000 9,500 4,000 1,000 4,500
August 60,000 34,000 8,000 3,000 1,500 4,500
(b) Cash balance on 1st May, 2021 is Rs 8,000.
(c) Plant costing Rs 16,000 is due for delivery in July, payable 10% on delivery and the
balance after 3 months.
(d) Advance tax of Rs 8,000 each is payable in March and June.
(e) Period of credit allowed
(i) by suppliers – two months, and
(ii) to customers – one month.
(f) Lag in payment of manufacturing – ½ months.
(g) Lag in payment of office and selling expenses – one month
3. As a Finance Manager what are the sources that you would prefer to raise short term loans from the money market for meeting working capital needs of your business and why?
4. XYZ Ltd. is in the business of manufacturing water filters. The current ratio at the end of the last year was 3:1 which appeared to be comfortable. However, the cash flow position, is rather weak and the company finds it difficult to make payments to the suppliers and workers on time. The composition of working capital as per the last balance sheet is provided here:
Cash and bank balances 1,00,000
Loans and advances 20,00,000
Current Liabilities 17,00,000
Mention specific possibilities of what might be causing cash flow difficulties in this context. Suggest any better ratios which the company might use to gauge its liquidity in future.