1. Define Working Capital and its importance.

2. What is Gross working capital and Net working capital?

3. Write a note on Trade Credit and commercial paper.

4. What is Cash? Define Cash Budget .State the utilities of the cash budget.
5. Calculate optimum cash balance under Baumol model from the particulars given below
Annual cash requirement : Rs 1 50,000
Fixed cost per transaction : Rs. 15
Interest rate on marketable securities : 18%
6. Sen& co. sells goods for cash as well as on credit. The following particulars are extracted from their
books of accounts for the year ended 31st December 2021:

Total gross sales (including cash sales Rs.20,000) 1,00,000

Sales return 7,000
Total debtors as on 31.12.21 9,000
Bills receivable as on 31.12.21 2,000
Provision for doubtful debts as on 31.12.21 1,000
Total creditors as on 31.12.21 10,000
Calculate the average collection period of debtors in days

7. Explain the sources of working capital

8. Calculate the operating cycle of a company which gives the following
details relating to its operations:
Amount (RS).
Raw materials consumption per annum 8,42,000
Annual cost of production 14,25,000
Annual cost of Sales 15,30,000
Annual sales 19,50,000
Average value of current assets held:
Raw materials = 1,24,000
Work in progress = 72,000
Finished goods = 1,22,000
Debtors = 2,60,000
The company gets 30 days credit from its suppliers. All sales made by the firm are on credit only. You
may take one year as equal to 365 days
9. Cost sheet of a company provide the following data:
Cost per unit (RS.)
Raw materials 50
Direct labour 20
Overheads 40
(Including
Depreciation
Of Rs.10)

Total cost 110

Profit 20
Selling price 130
Additional information:
Average raw materials in stock for 1 month. Average materials in
progress are for half-a month. Credit allowed by suppliers- one month.
Credit allowed to Debtors- one month.
Average time, lag in payment of wages- 10 days
Average time lag in payment of overheads -30 days.
25% of the sales are on a cash basis.
Cash balances expected to be Rs.1,00,000.
Finished goods lie in the Warehouse for -1 month.
You are required to prepare a statement showing the working capital needed to finance a level of
activity of 54,000 units of output. Production is carried on evenly throughout the year and wages and
overheads accrue similarly.

10. Prepare a cash budget for the months of May, June,July 2020 on the basis of the following information.
(a). Income and Expenditure Forecast

Month Credit Credit Wages Man. Office Selling

(2020) sales purchas (RS) expenses expenses expenses
(Rs) es (RS) (RS) (RS)
(Rs)
March 60,000 36,000 9,000 4,000 2,000 4,000

April 62,000 38,000 8,000 3,000 1,500 5,000

May 64,000 33,000 10,000 4,500 2,500 4,500

June 58,000 35,000 8,500 3,500 2,000 3,500

July 56,000 39,000 9,500 4,000 1,000 4,500

August 60,000 34,000 8,000 3,000 1,500 4,000

(b) Cash balance on 1st May ,2020 RS.8,000

(c) Plant costing RS.16,000 is due for delivery in July; payable 10% on delivery and the balance after
3 months
(d) Advance tax of RS.8,000 each is payable in March and June.
(e) period of credit allowed: i) by suppliers- 2 months; and ii) to customers- 1 month
(f) Lag in payment of manufacturing expenses – ½ month
(g) Lag in payment of office and selling expenses -1 month