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Ininstitute of Management Technology: Centre For Distance Learning

This document is an exam for a course on Working Capital Management. It contains two sections - Section A with multiple choice questions worth 9 marks each, and Section B, a case study worth 14 marks total. The case study is about an automobiles manufacturing company called M/s Sagar Ltd. that is seeking an enhancement of bank credit from Rs. 180 lacs to Rs. 240 lacs. Students are asked to calculate the permissible bank finance, identify the applicable method from the Tandon Committee, and explain how any shortfall from the bank could be arranged.

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78 views2 pages

Ininstitute of Management Technology: Centre For Distance Learning

This document is an exam for a course on Working Capital Management. It contains two sections - Section A with multiple choice questions worth 9 marks each, and Section B, a case study worth 14 marks total. The case study is about an automobiles manufacturing company called M/s Sagar Ltd. that is seeking an enhancement of bank credit from Rs. 180 lacs to Rs. 240 lacs. Students are asked to calculate the permissible bank finance, identify the applicable method from the Tandon Committee, and explain how any shortfall from the bank could be arranged.

Uploaded by

abhimani5472
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ININSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNING


GHAZIABAD
End-Term Examination – June 2008
Subject Code : IMT-07 Maximum Marks: 50
Subject Title : Working Capital Management Time allowed : 3 Hours

Instructions: (a) Answer any four questions choosing from Section-A and each question carries 9 marks.
Section-B (Case Study) carries 14 marks & all questions of case study are compulsory
(b) No doubts/clarifications shall be entertained. In case of doubts/clarifications make reasonable
assumptions and proceed.

SECTION-A (Answer any four questions from this section.Each question carries 9 marks)
1. What do you mean by operating cycle? How do you calculate its different
segments? 9
2. Comment on the usefulness of a funds-flow statement. What are the sources and
uses of funds? 9
3. Explain the purpose of holding cash. Explain briefly the factors determining cash
balance. 9
4. The annual demand for an item is 3,200 units. The unit cost is Rs 6 and the
inventory carrying
charge 25 percent p.a. If the cost of one procurement is Rs 150, determine:
(a) Economic order quantity (EOQ) 3x3
(b) Number of order per year
(c) Time between two consecutive orders
5. Explain the procedure adopted for selecting a customer to whom credit facilities
are provided. 9
6. ‘Liquidity and Profitability are competing goals for a Finance Manager’.
Comment. 9
7. A company’s cost sheet gives the following unit cost composition: 9

Raw material Rs. 5.0, Wages Rs. 4.0, production overheads Rs. 4.0,
selling overheads Rs. 2.0, profit Rs. 10.0 and selling price Rs. 25.0 per
unit. It expects to produce and sell 36000 units the coming year for
which it needs a working capital budget. The following turnover ratios
are given:

Age of raw material 45 days


Age of WIP 30 days
Age of finished goods 60 days
Age of debtors 50 days
Cash balance required is Rs. 20,000/-. Calculate the working capital
required after providing for contingencies @ 10%.

ETE-June 2008 Page 1 of 2 IMT-07


SECTION-B Case Study Marks 14

M/s Sagar ltd. is an automobiles manufacturing concern. You have joined the
finance department. The company has approached their bankers for enhancement of
bank credit to meet their working capital requirements from Rs. 180 lacs to Rs. 240
lacs. You have been assigned to take up the matter with the bank. The following
information is available.

Current liabilities (other than bank borrowings) have been valued at Rs. 400
lacs and bank borrowings are Rs. 180 lacs. Current ratio is 1.925 and quick ratio is
0.975. Half of the current assets are locked up in the stocks.
It is agreed between the bank and company that through stock will be
revalued at Rs. 365 lacs other current assets including investments will appreciate
by Rs. 80 lacs. However, no adjustment is required to be made in current liabilities.

Required to answer:

(a) Calculate permissible bank finance. 5

(b) Which method of Tandon Committee would be applicable and why?


4
(c) In case the limit applied is more than PBF, how would you arrange the
shortfall from bank? 5

ETE-June 2008 Page 2 of 2 IMT-07

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