WORKING CAPITAL MANAGEMENT- II
CHAPTER- 12
Review Questions...
A. OBJECTIVE TYPE AND MULTIPLE CHOICE QUESTIONS
1. Write whether each of the following statements is true or false:
(i) There is a time gap between cash inflows and cash outflows.
(ii) Lock box system is a method for accelerating cash outflows.
(iii) Bank float refers to the time taken by bank in collecting cheques.
(iv) Cash management is a trade off between the cost of carrying cash and the need of maintaining liquidity.
(v) A firm should always keep a large balance of cash so as to meet the contingencies.
[Ans- (i) true; (ii) False; (iii) True; (iv) True; (v) False
2. State whether each of the following statements is true of false:
(i) Receivables constitute a significant portion of fixed assets.
(ii) The volume of sales is influenced by credit policy of a firm.
(iii) Factoring is a from of financing receivables.
(iv) Average size of Receivables = Estimated annual Sales Y Average Collection Period.
(v) Trade off between profitability and cost of maintaining receivables is important for effective receivables management.
[Ans- (i) False; (ii) True; (iii) True; (iv) True; (v) True]
3. Indicate whether each of the following statements is true or false.
(a) Inventory management is essential because investment in stock are hig.
(b) The time required to process and execute an order is called lead time.
(c) Re-order level is the quantity of materials which must be kept in stock .
(d) A. B. C. analysis is used to manage spare parts. etc.
(e) Ordering costs are the costs of purchasing materials.
[Ans- (i) True; (ii) True; (iii) False; (iv) False; (v) True]
4. Fill in the blanks:
(i) The motives for holding cash are (i) ________ (ii) and (iii) _________ .
(ii) Lock box system is a technique of _________ cash inflows.
(iii) _________ is a tool of receivables management employed to release the funds tied up in credit extended to customers.
(iv) _________ level is the level beyond which quantity to materials should not fall in any case.
(v) EOQ stands for _________ .
[Ans- (i) transaction motive. perecautionary motive, speculative motive; (ii) accelerating; (iii) factoring; (iv) Danger; (v) Economic Order Quantity]
B. SHORT ANSWER TYPE QUESTIONS
1. What is the nature of cash ?
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2. Name various motives for holding cash.
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3. Write a few lines on lock box system.
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4. What do you mean by receivables ?
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5. What do you mean by inventory ?
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6. Give three objectives of holding inventories.
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7. Explain the term economic order quantity in 2-3 sentences.
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8. What is receivables management ?
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9. What do you mean by cash management ?
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10. What are cash inflows ?
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11. What is a cash budget ?
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12. What are the objectives of receivables management ?
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13. What is the nature of inventories ?
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14. What are the risks and costs of holding inventories ?
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15. Name various tools of inventory management.
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16. Explain danger level of inventories.
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17. What is VED analysis ?
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18. Write a note on aging of inventories.
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19. What is inventory turnover ratio ?
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20. What do you understand by payables management ?
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C. LONG ANSWER TYPE QUESTIONS
1. What do you understand by cash management ? How can it be undertaken ?
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2. ''Efficient cash management will aim at maximising the cash inflows and showing cash outflows.'' Discuss.
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3. What is a lock box system ? How does it help to reduce the cash balances ?
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4. What is 'receivables management' ? How is it useful for business concerns ?
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5. What should be the considerations in forming a credit policy ?
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6. Discuss the various aspects or dimensions of receivables management.
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7. What is meant by inventory management ? Why is it essential to a business concern ?
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8. discuss in detail the objectives of inventory management ?
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9. Define the term 'inventory Control'. What are the Inventory Control System ?
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10. Explain various tools and techniques used for inventory management ?
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11. What is A-B-C analysis ? How is it useful as a tool of inventory management ?
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12. ''Efficient cash management will aim at maximizing the cash inflows and slowing cash outflows.'' Discuss.
13. What is inventory management ? Explain the various tools and techniques used for inventory management.
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Questions Type By- Janmoni Hazarika
