Commerce Exam > Commerce Notes > Additional Study Material for Commerce > Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12
Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download
Q1. Why is working capital called circulating capital ? (4 marks)
Ans. Working capital is called the “Changing” or “Circulating Capital”, since the money circulates in various forms of current assets in a continued manner. For example, funds once tide up in the form of raw material are later converted into the form of finished goods which are ultimately sold.
Q2. How do we calculate the total cost of production ? (4 marks)
Ans. Total cost of production is calculated annually. In these various assets, like current assets and fixed assets, are those assets which are purchased to be used in the operations of the business, not for sale. It is used over the entire life of the project. For distributing this equally on annual basis, depreciation is calculated on various assets at prescribed rates. This depreciation is added with recurring expenditure and interest on total investment to calculate the total cost of production.
Q3. 200 brooms are proposed to be produced per week by a firm and for that ` 2,000 are needed for raw materials, ` 1,000 for wages and other changes. If it takes three weeks to receive the payments on the sales, then calculate working capital. (4 marks)
Ans. The money spent during the first week comes only at the end of fourth week.
Working capital is needed for four weeks.
Working capital = (` 2,000 + 1,000) × 4 weeks
= ` 3,000 × 4
= ` 12,000
Q4. Differentiate between Gross working capital and Net working capital. (4 marks)
Ans.
S. No. | Gross Working Capital | Net Working Capital |
(i) | This refers to investments in all current assets. | This refers to excess of current assets over current liabilities. |
(ii) | These current assets get converted into cash within an accounting year. | Current liabilities are to be paid within an accounting year. |
(iii) | Examples : Cash in hand, debtors, etc. | Examples : Bills payables, creditors, etc. |
Q5. Distinguish between fixed capital and working capital. (4 marks)
Ans.
Basis | Fixed Capital | Working Capital |
Need | It is needed for meeting long-term requirement of the enterprise. | It is needed for short-term requirement of the enterprise. |
Flexibility | It is flexible only upto the point when the investment is not made | It is flexible as it can be increased or decreased as per the requirements. |
Examples | It is needed for acquiring fixed assets like land, building, etc. | It is needed for payment for current assets like wages to labour, transportation, etc. |
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FAQs on Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 - Additional Study Material for Commerce
| 1. What is business arithmetic and why is it important in entrepreneurship? |  |
Ans. Business arithmetic refers to the application of mathematical concepts and calculations in business transactions and financial decision-making. It involves tasks such as calculating profit and loss, determining pricing strategies, analyzing financial statements, and forecasting future revenues. It is important in entrepreneurship as it equips entrepreneurs with the skills to make informed financial decisions, manage resources effectively, and maximize profitability.
| 2. How can business arithmetic help entrepreneurs in managing their finances? | |
Ans. Business arithmetic plays a crucial role in helping entrepreneurs manage their finances effectively. By using mathematical calculations, entrepreneurs can track their revenues, expenses, and profits accurately. They can analyze financial statements, such as income statements and balance sheets, to gain insights into their business performance. Additionally, business arithmetic enables entrepreneurs to calculate pricing strategies, analyze investment opportunities, and forecast future revenues, which aids in making informed financial decisions.
| 3. What are some key concepts covered in business arithmetic? | |
Ans. Business arithmetic covers various key concepts, including profit and loss calculations, cost analysis, pricing strategies, break-even analysis, budgeting, financial ratios, and investment analysis. These concepts are essential for entrepreneurs to understand and apply in order to effectively manage their finances and make informed business decisions.
| 4. How can entrepreneurs benefit from understanding business arithmetic? | |
Ans. Understanding business arithmetic can benefit entrepreneurs in several ways. Firstly, it enables them to accurately calculate and analyze their financial performance, allowing them to identify areas of improvement and make necessary adjustments. Secondly, it provides entrepreneurs with the knowledge to determine appropriate pricing strategies, ensuring profitability. Thirdly, business arithmetic aids in budgeting and managing cash flow, allowing entrepreneurs to allocate resources efficiently. Lastly, understanding business arithmetic helps entrepreneurs evaluate investment opportunities and make informed decisions for business growth.
| 5. Where can entrepreneurs learn and improve their business arithmetic skills? | |
Ans. Entrepreneurs can learn and improve their business arithmetic skills through various means. They can enroll in business and finance courses offered by universities or online platforms. These courses cover topics such as financial management, accounting, and business mathematics. Additionally, entrepreneurs can seek guidance from business mentors or hire professionals, such as accountants or financial advisors, who can provide expertise in managing finances. Self-study through books, online resources, and practice exercises can also help entrepreneurs enhance their business arithmetic skills.
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Nov 13, 2024 Last updated |
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