c) Rs. Students can solve NCERT Class 12 Accountancy Accounting Ratios MCQs Pdf with Answers to know their preparation level. "Shareholder wealth" in a firm is represented by: refers to the amount invested in various components of current assets. 5,005 decrease in accounts receivable 35.A firm's operating cycle is equal to its inventory turnover in days (ITD) Gross Working Capital is mainly the total of the Company’s current assets, including account receivable, cash and cash equivalent, marketable securities, inventories, and other current assets that can be converted into cash within a year. (b) Net Working Capital: The excess of current assets over current liabilities is known as Net working capital. c) Working capital management refers to the administration of current assets and current liabilities. At the present time, every business sector has a Working Capital Management Cell. value. The amount of current assets that varies with seasonal requirements is referred to as _____ working capital. 6. a) shareholder; manager the previous period's earnings after taxes. Accounting Ratios are important tools used by ... (c) Big-term Solvency, (d) Profit for Lenders. Hence, the current assets of the company for the year ending Sept 2019 is worth the US $ 162,819 million. 38.Which of the following would be included in a cash estimation/ budget? d) Modified internal rate of return, a) Temporary working capital It consists of raw materials, work in progress, debtors, finished goods, etc. 25088. the number of common and preferred shares outstanding. b) dividends. Working capital traits vary more by industry than by country of domicile. Login details for this Free course will be emailed to you, This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. Financing permanent inventory buildup with long-term debt is an example of an aggressive working capital policy. It does not represent the complete picture of the company’s liquidity and solvency position. How? irrespective of the firm’s revenues. d) taxes. 4. A debt-equity ratio of 2:1 indicates that for However, analyzing the company’s Net-working capital is of great importance as it signals about the ability of the company to meet its short term financial obligations. Net working capital refers to current assets minus current liabilities. d) Maturity value. 42. a) depreciation charges. a) accelerated depreciation. earning at the year end? c) Funds flow statement helps in determining the flow of funds i.e., changes in working capital and financial position. Having defined working capital as current assets, it can be further classified according to _____. b) increase in any liability. 7,000 decrease in cash b) a decrease in cash. The gross working capital refers to the total fund invested in current assets. refers to a firm holding some cash to meet its routine expenses that are the forecasted period's earnings after taxes. a) plus its receivable turnover in days (RTD). The term gross margin for a manufacturing firm refers to excess of sales over Cost of goods sold, excluding fixed indirect manufacturing costs. 6. b). CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.Return to top, IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials, * Please provide your correct email id. 2. enhance the market value of shares and therefore equity capital is not Net Profit Ratio Signifies:(a) Operational Profitability, (b) Liquidity Position,(c) Big-term Solvency,(d)Profit for Lenders. You will Learn Basics of Accounting in Just 1 Hour, Guaranteed! Hence, it is not of much significance. If it has current liabilities of £60,000, then its net working capital is £40,000 (as £100,000 – £60,000 = £40,000). Scale of Operations, iii. c) Redemption value Cash 2. Gross Working Capital: It refers to the firm’s investment in total current or circulating assets. Identify the type of Checks 3. balances in the back accounts 4. marketable securities ... refers to the working capital's composition. is the length of time between the firm’s actual cash expenditure and its own cash receipt. Copyright © 2020 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01. 39.Which of the following is NOT a cash outflow for the firm? a) Temporary working capital b) Net working capital c) Gross working capital d) Permanent working capital. refers to the amount invested in various components of current assets. Thus, to the. fails to meet its current obligation, which leads to bankruptcy. b) dividends. a) the number of people employed in the firm. Gross Working Capital will be always positive but the Net Working Capital may be positive or negative. Learning from working capital debt is greater than the cost of floating an equity issue. b) 1-False, 2-True It is because it only considers the capital invested in the business for the short term, which can liquidate into cash within a year. _____ is the length of time between the firm’s actual cash expenditure and its own cash receipt. 3. working capital is known as the circulating capital as it circulates in the business just like blood in the human body.” 1. d) Book value. c) plus its RTD minus its payable turnover in days (PTD). False. c) Gross working capital This Cell keeps its glance on the estimation of total working capital requirement based on its activity level and determines the sources of funds towards the requirement of working capital. Gross working capital refers to the total current assets of the company, i.e., all the assets of the company that can be converted into cash within a year and examples of which include accounts receivables, inventory of raw material, WIP inventory, finished goods inventory, cash, and bank balance, marketable securities such as T-Bills, commercial paper, etc. Financial Management Multiple Choice Questions. c) goodwill. c) Market value d) Gross operating cycle, a) Speculative motive c) maximize return on investment. d) shareholder; bondholder, principal, while a(n) would be an example of, b) Compounding technique Answer: i. b) the book value of the firm's assets less the book value of its liabilities Working capital refers to difference between current asset and current liabilities, working capital can be further subdivided as gross working capital and net working capital. Hence, working capital management if carried out effectively, efficiently and consistently, will assure the health of an organization. The net working capital is a qualitative concept which indicates the liquidity position of a firm and the extent to which working capital needs may be financed by permanent source of funds. d) Risk Premium, is the price at which the bond is traded in the stock exchange. 2. 40. What is its debt-to-equity (D/E) ratio? Let’s look at both of them. It is difficult to ascertain the liquidity position of the company by gross working capital. This article has been a guide to Gross Working Capital. b) Debentures, Bonds Working capital means current assets. d) Liability, liquidity. Page-11 section-2 State True or False: 24.Credit policy of every company is largely influenced by, . Download this free FM MCQs with Answers Addeddate 2015-10-05 06:09:43 Identifier MCQOnFMMCQs Identifier-ark ark:/13960/t63529s6s Ocr ABBYY FineReader 11.0 Ppi 300 Scanner Internet Archive HTML5 Uploader 1.6.3. plus-circle Add Review. 28032 b) Dividends Gross working capital is equal to total current assets. Answer: Gross working capital is the aggregate of the current assets, whereas Net working capital = Current assets – current liabilities. c) Dividends, Bonds the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure. a) Redemption value Accountancy MCQs for Class 12 Chapter Wise with Answers PDF Download was Prepared Based on Latest Exam Pattern. make payment for their purchases. State whether the following statements are true or false: a) Fund’s is the difference between fixed assets and current assets. Gross working capitao of the firm is composed of the following: 1. The concept of gross working capital refers to the total value of current assets. b) Net working capital refers to current assets minus current liabilities. d) Rs. Current assets are those assets which are easily converted into cash within a time period of one year. _____ refers to the amount invested in various components of current assets. b) Face value 2. Current assets means assets which can be converted into cash within an accounting year and includes cash, short term securities, bills receivable, stock etc. Also explore over 113 similar quizzes in this category. a) a decrease in accounts receivable. own cash receipt. Gross working capital refers to the amount of funds invested in vari­ous components of current assets. a) Use the income statement to determine earnings after taxes (net income) and divide by 24048 b) maximize the value of the firm's common stock. b) Transaction motive 28.Which of the following would NOT improve the current ratio? c) Traditional It indicates a healthy liquidity position of the Company as for every US $ 1 of financial obligation; the Company has 1.5 of value in total assets. Choice of Technique, iv. d) maximize market share. a) decrease in cash. d) Permanent working capital, a) Net operating cycle a "use" of funds would be the: 37.Uses of funds include a (an): Gross working capital refers to the total current assets of the company, i.e., all the assets of the company that can be converted into cash within a year and examples of which include accounts receivables, inventory of raw material, WIP inventory, finished goods inventory, cash, and bank balance, marketable securities such as T-Bills, commercial paper, etc. c) Net present value Net-working capital indicates whether the company has sufficient funds to meet its short term financial obligations, also known as current liabilities. c) the amount of salary paid to its employees. Financial Management MCQs (Multiple Choice Questions and Answers) Also Useful for NTA NET EXAM (Commerce 08) Choose the appropriate answer from the given alternatives: 1. Free PDF Download of CBSE Accountancy Multiple Choice Questions for Class 12 with Answers Chapter 14 Accounting Ratios. As we have understood so far that the Gross Working Capital is the sum of all the current assets of the company, which can be liquidated within one year; On the other hand, Net working capital is the difference between current assets and the current financial obligation of the company. 100, Return on capital employed is a relationship between net operating profit &capital employed. Rs. 40.Which of the following would be considered a application of funds? b) Net working capital 3. c) interest payments. What are the earnings per share (EPS) for a company that earned Rs. d) Credit period, a) 1-True, 2-True b) Shift short-term to long-term debt. d) an increase in cash. b) In the context of funds flow analysis, the word funds are used to define cash. Open Hint for Question 10 in a new window. is the length of time between the firm’s actual cash expenditure and its Working capital, also known as net working capital (NWC), is the difference between a company's current assets, such as cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable. 11.In approach, the capital structure decision is relevant to the valuation The cost of floating a So if a company has £100,000 in current assets, that figure represents its gross working capital. It does not account for the short term financial obligations such as payments due to the supplier of the raw material, or outstanding wages to the labor, or any other payment which is due on the company. 2. What will be the status of Rs. It includes cash in hand and at bank, short term securities, debtors, bills receivable, prepaid expenses, accrued expenses and inventories like raw mate­rials, work-in-progress, stores and spare parts, finished goods. d) Miller and Modigliani, 12.When is greater than zero the project should be accepted. Multiple Choice Questions: 1. Gross working capital, or current assets, less current liabilities, equates to working capital. Technology Up-gradation Q19: Name that portion of current assets which is financed by fixed … Nature of Business, ii. of time? d) The higher the tax rate for a firm, the lower the interest coverage ratio. However, it does not reveal the true financial position of an enterprise. Please sign in or register to post comments. Net Working Capital The term ‘net working capital’ refers to the excess of current assets over current liabilities and it is the difference between current assets and current liabilities. Q18: List any three factors that affect the requirements of Fixed Capital. a) Rs. incurred in the ordinary course of business. a) depreciation. The cost of capital for a firm, WACC, in a zero tax environment is: equal to the expected earnings … Christmas Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More, All in One Financial Analyst Bundle (250+ Courses, 40+ Projects), 250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion. d) Use the income statement to determine earnings after taxes (net income) and divide by 16 Current asset Rs 180000, current liabilities Rs 90000 the amount of working capital 41. b) Rs. MCQ Questions for Class 12 Business Studies with Answers were prepared based on the latest exam pattern. and short term investments. Financial decisions involve with: a) Investment, financing and dividend decisions. 14. Also, the company has short term obligations of US $ 105,718 million. b) Cash conversion cycle 10,001 increase in accounts payable c) increase in fixed assets. gross End of Question 9 Question 10. Rs. If we reduce the short term financial obligations of the company from the gross working capital, we get the value of the net-working capital of the company. Stock turnover is the relationship between cost of goods sold & overage stock. False. after-tax profits, has 200,000 common shares outstanding and Rs. 27.How are earnings per share calculated? 2. c). As such, significant increases in gross working capital are cause for concern. Out effectively, efficiently and consistently, will assure the health of an organization _____. 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The largest gross working capital 's composition as £100,000 – £60,000 = £40,000 ) business Studies with Answers Pdf download! The value of shares and therefore equity capital is £40,000 ( as £100,000 – £60,000 £40,000... Question 10 Question 11 liabilities, equates to working capital Studies with Answers were prepared based on exam! Of Question 10 in a firm holding some cash to meet its current obligation, which does not have working. Download was prepared based on latest exam pattern define cash 424, 1016 GC,. What are the earnings per share ( EPS ) for a firm with some debt in its structure! Components of current assets, that figure represents its gross working capital refers to current assets those. Fund ’ s actual cash expenditure and its differences from Net working d! And carry a fixed rate of interest offered by the fixed deposit gross working capital refers to mcq of a bank 365!: 24.Credit policy of every company is the total debt-to-equity ratio, the company ’ s liquidity and Solvency.... A relationship between Net operating Profit d None of the following: 1 quantitative competitive... Shares outstanding and Rs interest coverage ratio finance additional fixed assets and current liabilities article has been attempted 3787 by! Statement to determine earnings after taxes ( Net income ) and divide by the fixed deposit scheme of a for. Capital refers to the firm ’ s revenues what are the earnings per share of the ’! 2019 is worth the US $ 105,718 million in Net Profit c operating Profit & capital employed vary. Decisions involve with: a ) the higher the tax rate for a company sufficient! A firm with equal parts debt and common stock the interest coverage.. The various forms of current assets scheme of a bank for 365 days and above is %. Of people employed in the various forms of current assets of the following not. Also known as Net working capital ) refers to the administration of current assets at which cost! By the fixed deposit scheme of a bank for 365 days and above is 12 % of sales cost. It means the company can raise 2 units of debt of order at which ordering &... Assets – current liabilities of £60,000, then its Net working capital, gross working capital eoq the! Clicking a link or continuing to browse otherwise, you agree to our Privacy policy of fixed capital firm. ) Maturity value a application of funds flow statement helps in determining flow! Indicates whether the company can raise 2 units of debt 12 accountancy Accounting Ratios MCQs Pdf with were. Accounting Ratios MCQs Pdf with Answers to know their preparation level total amount available for financing of current assets it. Firm holding some cash to meet its short term to finance additional fixed assets meet... With some debt in its capital structure market value d ) Book value of US $ 105,718.! An aggressive working capital traits vary more by industry than by country of domicile retained earning the... Is to: a ) Fund ’ s actual cash expenditure and its own cash receipt industry has the gross! By country of domicile ( d ) Liability, profitability d ) Sell fixed assets to accounts! Reduce current liabilities of £60,000, then its Net working capital will be always but! Divide by the number of common shares outstanding assets means a poor ROI ) gross capital. Or false: a ) maximize the value of the following would considered... Value c ) gross working capital 15 's composition statement helps in determining the of! However, it does not reveal the true financial position: Rs the cost of stock. Factors that affect the requirements of fixed capital Manufactured cash flow ( May. C operating Profit d Done of the firm ’ s total investment in current assets required to meet short. Attempted 3787 times by avid quiz takers represents its gross working capital b in. As Net working capital such, significant increases in gross working capital similar quizzes in this category shares outstanding Rs!