1 Discuss the various factors that you as a finance manager, would have to take into consideration before assessing the working capital requirements of your firm?
2 Visit any Bank Branch of your choice and study the methods of Appraisal that the Bank follows while extending credit facility to the business houses. Write a detail note on your findings.
3 ‘Ascertaining and analyzing the credit worthiness of customers, before extending credit, is an important and difficult task’, comment?
4 Under what condition or conditions firm might find it desirable
to invest funds in marketable securities? Describe the different type
of securities in which you would invest these funds & the strategies
that will be adopted to manage these securities.
5 A statement showing the working capital to finance a level of activity
of 1,80,000 units of output for the year has been called for by the
management of Roy Industries. For the activity level of 1,80,000 units
the cost structure for the company’s product is given below:
| Cost per unit | |
| Raw material | 20 |
| Direct labor | 5 |
| Overheads (including depreciation of Rs.5 per unit) | 15 |
| 40 | |
| Profit | 10 |
| Selling price | 50 |
Additional information:
a) Minimum desired cash balance is Rs.20,000.
b) Raw materials are held in stock, on an average, for two months.
c) Work-in-progress (assume 50% completion stage) will approximate
to half-a-month’s production.
d) Finished goods remain in warehouse, on an average, for a month.
e) Suppliers of materials extend a month’s credit and debtors
are provided two month’s credit; cash sales are 25% of total
sales.
f) There is a time-lag in payment of wages of a month; and half-a-month
in the case of overheads.
From the above facts, you are required to prepare a statement showing
working capital requirements.