Working Capital Management — DU Bachelor of Business Administration (Financial Investment Analysis) Previous Year Question Papers

Q2. (a) Calculate Net Operating Cycle period and Number of Operating Cycles in a year from below information (Assume 360 days in a year): 9 Marks Raw material inventory consumed during the year ·6,00,000 Average stock of raw material ·50,000 Cost of production for the year ·5,00,000 Average work-in-progress inventory $25,000 Cost of goods sold during the year ·8,00,000 Average Finished Goods Inventory 340,000 Average collection period from debtors 45 days Average credit period availed 30 days (b) Discuss the objectives and significance of Working Capital Management in modern business organizations. 9 Marks Q3. A trader whose current sales are & 30 lakhs per annum and average collection period is 60 days wants to pursue a more liberal credit policy to improve sales. A study made by a consultant firm reveals the following information: Credit Policy Increase in Collection Period Increase in Sales The selling price per unit is & 10. Average cost per unit is $ 8 and variable cost per unit is ? 5.5 per unit. The required rate of return on additional investments is 20 percent. Assume 360 days in a year and also assume that there are no bad debts. Which of the above policies would you recommend for adoption? 18 Marks Q4. (a) Explain the various motives for holding cash, including transaction, precautionary, and speculative motives. 9 Marks (b) Discuss the characteristics and types of marketable securities. 9 Marks Q5. (a) Explain the benefits of holding inventory. Are there any disadvantages? Justify your answer. 9 Marks (b) Explain the EOQ model of Inventory control. What are its shortcomings? 9 Marks Q6. Write short notes on any three- (6*3=18 Marks) a. Net operating cycle b. JIT technique c. Optimal credit policy d. Aggressive Approach