Very Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. What is working capital ? (1 mark)
Ans. Money needed to fund the normal day-to-day operations of a business is known as working capital.

Q2. What is operating cycle or cash conversion cycle ? (TBQ) (2 marks)
Ans. It is the length of time between a firm’s purchase of inventory and the receipt of cash from accounts receivable.

Q3. What are current assets ? Give examples. (2 marks)
Ans. Current assets comprise of items that would get converted into cash in the short-run, say within normal operating cycle of the busines, e.g., stock, debtors, etc.

Q4. What are current liabilities ? Give examples. (2 marks)
Ans. Current liabilities represent short-term source of funds and are expected to fall due or mature for payment in a short period, generally within a year, e.g., trade creditors, outstanding expenses, etc.

Q5. What kinds of items are included in the working capital ? (2 marks)
Ans. Working capital includes salary & wages, cost of raw materials on utilities like water, electricity, fuel, advertising and publicity, transport, commission, rent, taxes, stationery, sales expenses, etc.

Q6. What do you mean by depreciation ? (1 mark)
Ans. Depreciation means reducing the balance of fixed assets due to wear and tear over the passage of time.