Working Capital Management Objectives Set 2

76. Concentration Banking helps in

• Reducing Idle Bank Balance
• Increasing Collection
• Increasing Creditors
• Reducing Bank Transactions.

 

77. The Transaction Motive for holding cash is for

• Safety Cushion
• Daily Operations
• Purchase of Assets
• Payment of Dividends

 

78. Miller-Orr Model deals with

• Optimum Cash Balance
• Optimum Finished goods
• Optimum Receivables
• All of the above

 

79. Float management is related to

• Cash Management
• Inventory Management
• Receivables Management
• Raw Materials Management

 

80. Which of the following is not an objective of cash management?

• Maximization of cash balance
• Minimization of cash balance
• Optimization of cash balance,
• Zero cash balance.

 

81. Which of the following is not true of cash budget?

• Cash budget indicates timings of short-term borrowing
• Cash budget is based on accrual concept
• Cash budget is based on cash flow concept
• Repayment of principal amount of law is shown in cash budget

 

82. Baumol’s Model of Cash Management attempts to:

• Minimise the holding cost,
• Minimization of transaction cost,
• Minimization of total cost,
• Minimization of cash balance

 

83. Which of the following is not considered by Miller-Orr Model?

• Variability in cash requirement
• Cost of transaction,
• Holding cost,
• Total annual requirement of cash.

 

84. Marketable securities are primarily

• Equity shares
• Preference shares
• Fixed deposits with companies
• Short-term debt investments.

 

85. 5Cs of the credit does not include

• Collateral
• Character
• Conditions
• None of the above

 

86. Which of the following is not an element of credit policy?

• Credit Terms
• Collection Policy
• Cash Discount Terms
• Sales Price.

 

87. Ageing schedule incorporates the relationship between

• Creditors and Days Outstanding
• Debtors and Days Outstanding
• Average Age of Directors
• Average Age of All Employees

 

88. Bad debt cost is not borne by factor in case of

• Pure Factoring
• Without Recourse Factoring
• With Recourse Factoring
• None of the above

 

89. Which of the following is not a technique of receivables Management?

• Funds Flow Analysis
• Ageing Schedule
• Days sales outstanding
• Collection Matrix

 

90. Which of the following is not a part of credit policy?

• Collection Effort
• Cash Discount
• Credit Standard
• Paying Practices of debtors

 

91. Which is not a service of a factor?

• Administrating Sales Ledger
• Advancing against Credit Sales
• Assuming bad debt losses
• None of the above

 

92. Credit Policy of a firm should involve a trade-off between increased

• Sales and Increased Profit
• Profit and Increased Costs of Receivables
• Sales and Cost of goods sold
• None of the above

 

93. Out of the following, what is not true in respect of factoring?

• Continuous Arrangement between Factor and Seller
• Sale of Receivables to the factor
• Factor provides cost free finance to seller
• None of the above

 

94. Payment to creditors is a manifestation of cash held for:

• Transactionery Motive
• Precautionary Motive
• Speculative Motive
• All of the above

 

95. If the closing balance of receivables is less than the opening balance for a month then which one is true out of

• Collections>Current Purchases
• Collections>Current Sales
• Collections<Current Purchases
• Collections < Current Sales

 

96. If the average balance of debtors has increased, which of the following might not show a change in general?

• Total Sales
• Average Payables
• Current Ratio
• Bad Debt loss

 

97. Securitization is related to conversion of

• Receivables
• Stock
• Investments
• Creditors

 

98. 80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8. What is the Average collection period (360 days a year) and Average Debtors of the firm?

• 45 days and 1,00,000
• 360 days and 1,00,000
• 45 days and 8,00,000
• 360 days and 1,25,000

 

99. In response to market expectations, the credit pence r j been increased from 45 days to 60 days. This would result in

• Decrease in Sales
• Decrease in Debtors
• Increase in Bad Debts
• Increase in Average Collection Period

 

100. If a company sells its receivable to another party to raise funds, it is known as 

• Factoring
• Pledging
• None of the above.
• Securitization

 

101. Cash Discount term 3/15, net 40 means

• 3% Discount if payment in 15 days, otherwise full payment in 40 days
• 15% Discount if payment in 3 days, otherwise full payment 40 days
• 3% Interest if payment made in 40 days and 15%, interest thereafter
• None of the above

 

102. If the sales of the firm are. 60,00,000 and the average debtors are. 15,00,000 then the receivables turnover is

• 4 times
• 25%
• 400%
• 0.25 times

 

103. If cash discount is offered to customers, then which of the following would increase?

• Sales
• Debtors
• Debt collection period
• All of the above

 

104. Receivables Management deals with

• Receipts of raw materials
• Debtors collection
• Creditors Management
• Inventory Management

 

105. Which of the following is related to Receivables Management?

• Cash Budget
• Economic Order Quantity
• Ageing Schedule
• All of the above

 

106. EOQ is the quantity that minimizes

• Total Ordering Cost
• Total Inventory Cost
• Total Interest Cost
• Safety Stock Level

 

107. ABC Analysis is used in

• Inventory Management
• Receivables Management
• Accounting Policies
• Corporate Governance

 

108. If no information is available, the General Rule for valuation of stock for balance sheet is

• Replacement Cost
• Realizable Value
• Historical Cost
• Standard Cost

 

109. In ABC inventory management system, class A items may require

• Higher Safety Stock
• Frequent Deliveries
• Periodic Inventory system
• Updating of inventory records

 

110. Inventory holding cost may include

• Material Purchase Cost
• Penalty charge for default
• Interest on loan
• None of the above

 

111. Use of safety stock by a firm would

• Increase Inventory Cost
• Decrease Inventory Cost
• No effect on cost
• None of the above

 

112. Which of the following is true for a company which uses continuous review inventory system

• Order Interval is fixed
• Order Interval varies
• Order Quantity is fixed
• Both (a) and (c)

 

113. EOQ determines the order size when

• Total Order cost is Minimum
• Total Number of orders is least
• Total inventory costs are minimum
• None of the above

 

114. ABC Analysis is useful for analyzing the inventories:

• Based on their Quality
• Based on their Usage and value
• Based on Physical Volume
• All of the above

 

115. If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per annum, then EOQ

• (2AO/C) 2
• 2AO/C
• 2A÷OC
• 2AOC

 

116. Inventory is generally valued as lower of

• Market Price and Replacement Cost
• Cost and Net Realizable Value
• Cost and Sales Value
• Sales Value and Profit

 

117. Which of the following is not included in cost of inventory?

• Purchase cost
• Transport in Cost
• Import Duty
• Selling Costs

 

118. Cost of not carrying sufficient inventory is known as

• Carrying Cost
• Holding Cost
• Total Cost
• Stock-out Cost

 

119. Which of the following is not a benefit of carrying inventories

• Reduction in ordering cost
• Avoiding lost sales
• Reducing carrying cost
• Avoiding Production Shortages

 

120. Which of the following is not a standard method of inventory valuation?

• First in First out
• Standard Cost
• Average Pricing
• Realizable Value

 

121. System of procuring goods when required, is known as,

• Free on Board (FOB)
• always Butter Control (ABC)
• Jest in Time (JIT)
• Economic Order Quantity

 

122. A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better inventory management, the inventory turnover is increased to 10. This would result in:

• Increase in inventory by 50,000
• Decrease in inventory by 50,000
• Decrease in cost of goods sold
• Increase in cost of goods sold

 

123. What is Economic Order Quantity?

• Cost of an Order
• Cost of Stock
• Reorder level
• Optimum order size

 

124. The type of collateral (security) used for short-term loan is

• Real estate
• Plant & Machinery
• Stock of good
• Equity share capital

 

125. Which of the following is a liability of a bank?

• Treasury Bills
• Commercial papers
• Certificate of Deposits
• Junk Bonds

 

126. Commercial paper is a type of

• Fixed coupon Bond
• Unsecured short-term debt
• Equity share capital
• Government Bond

 

127.Which of the following is not a spontaneous source of short-term funds?

• Trade credit
• Accrued expenses
• Provision for dividend
• All of the above

 

128. Concept of Maximum Permissible Bank finance was introduced by

• Kannan Committee
• Chore Committee
• Nayak Committee
• Tandon Committee

 

129. In India, Commercial Papers are issued as per the guidelines issued by

• Securities and Exchange Board of India
• Reserve Bank of India
• Forward Market Commission
• None of the above

 

130. Commercial paper are generally issued at a price

• Equal to face value
• More than face value
• Less than face value
• Equal to redemption value

 

131. Which of the following is not applicable to commercial paper

• Face Value
• Issue Price
• Coupon Rate
• None of the above

 

132. The basic objective of Tandon Committee recommendations is that the dependence of industry on bank should gradually

• Increase
• Remain Stable
• Decrease
• None of the above

 

133. Cash discount terms offered by trade creditors never be accepted because

• Benefit in very small
• Cost is very high
• No sense to pay earlier
• None of the above

 

134. In lease system, interest is calculated on

• Cash down payment
• Cash price outstanding
• Hire purchase price
• None of the above

 

135. A short-term lease which is often cancellable is known as

• Finance Lease
• Net Lease
• Operating Lease
• Leverage Lease

 

136. Which of the following is not a usual type of lease arrangement?

• Sale & leaseback
• Goods on Approval
• Leverage Lease
• Direct Lease

 

137. Under income-tax provisions, depreciation on lease asset is allowed to

• Lessor
• Lessee
• Any of the two
• None of the two

 

138. Under the provisions of AS-19 ‘Leases’, a leased asset is shown is the balance sheet of

• Manufacturer
• Lessor
• Lessee
• Financing bank

 

139. A lease which is generally not cancellable and covers full economic life of the asset is known as

• Sale and leaseback
• Operating Lease
• Finance Lease
• Economic Lease

 

140. Lease which includes a third party (a lender) is known as

• Sale and leaseback
• Direct Lease
• Inverse Lease
• Leveraged Lease

 

141. One difference between Operating and Financial lease is:

• There is often an option to buy in operating lease
• There is often a call option in financial lease
• An operating lease is generally cancellable by lease
• A financial lease in generally cancellable by lease

 

142. From the point of view of the lessee, a lease is a:

• Working capital decision
• Financing decision
• Buy or make decision
• Investment decision

 

143. For a lesser, a lease is a

• Investment decision
• Financing decision
• Dividend decision
• None of the above

 

144. Which of the following is not true for a “Lease decision for the lessee?

• Helps in project selection
• Helps in project financing
• Helps in project location
• All of the above

 

145. Risk-Return trade off implies

• Minimization of Risk
• Maximization of Risk
• Ignorance of Risk
• Optimization of Risk

 

146. Basic objective of diversification is

• Increasing Return
• Maximizing Return
• Decreasing Risk
• Maximizing Risk