FINANCIAL MANAGEMENT

What is the operating cycle?

• The time taken to convert cash into goods

• The time taken to convert cash into cash again

• The time taken for the production process

• The time taken to calculate profits

Which of the following describes the correct order of the operating cycle?

• Cash → Work in Progress → Raw Materials → Finished Goods → Sundry Debtors → Bills Receivables → Cash

• Cash → Raw Materials → Work in Progress → Finished Goods → Sundry Debtors → Bills Receivables → Cash

• Raw Materials → Work in Progress → Finished Goods → Sundry Debtors → Bills Receivables → Cash → Raw Materials

• Cash → Sundry Debtors → Finished Goods → Work in Progress → Raw Materials → Bills Receivables → Cash

What does the operating cycle measure?

• Profitability of the business

• Time from production to collection of cash

• Efficiency in production

• Total sales over a period

Which of the following statements is true regarding working capital?

• It represents excess of current liabilities over current assets.

• It is used for day-to-day business operations.

• It finances fixed assets of the business.

• Total liabilities of the business

Other term for working capital

• Fixed capital

• Long-term capital

• Circulating capital
  

• Retained earnings

Permanent Working Capital means

• Funds that are temporarily locked in assets

• Funds permanently locked in current assets to ensure smooth business operations

• Funds used for investment in fixed assets

• Excess funds available for long-term loans

Purpose of Regular Working Capital is

• To expand the business operations

• To handle contingencies and uncertainties

• To keep the primary circulation of cash for wages, salaries, etc.

• To purchase additional machinery

Reserve Margin Working Capital used for

• Handling business contingencies like strikes and depressions

• Expanding product lines

• Investing in the stock market

• Repaying long-term debts

Variable Working Capital refer to

• Working capital that remains fixed throughout the year

• Temporary and fluctuating working capital that changes with business volume

• Funds locked permanently in current assets

• Funds used only for unexpected expenses

Seasonal Variable Working Capital required for

• During unexpected emergencies

• During active business seasons of the year

• long-term investment

• manage fixed assets