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Test: Working Capital- 1 - B Com MCQ


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10 Questions MCQ Test - Test: Working Capital- 1

Test: Working Capital- 1 for B Com 2024 is part of B Com preparation. The Test: Working Capital- 1 questions and answers have been prepared according to the B Com exam syllabus.The Test: Working Capital- 1 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Working Capital- 1 below.
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Test: Working Capital- 1 - Question 1
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What is the primary purpose of working capital in a business concern?

Detailed Solution for Test: Working Capital- 1 - Question 1
Working capital is primarily concerned with managing short-term finances to maintain liquidity and meet day-to-day operational requirements, including payment of creditors, salaries, and purchase of raw materials. It's an essential component that ensures the smooth functioning of a business.
Test: Working Capital- 1 - Question 2
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What does Negative Working Capital indicate?

Detailed Solution for Test: Working Capital- 1 - Question 2
Negative Working Capital occurs when current liabilities exceed current assets, indicating that the business might not have enough liquidity to cover its short-term obligations. This situation can raise concerns about the company's financial health and its ability to manage its operational costs effectively.
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Test: Working Capital- 1 - Question 3
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What is the purpose of Seasonal Working Capital?

Detailed Solution for Test: Working Capital- 1 - Question 3
Seasonal Working Capital is required to address the temporary variations in demand caused by seasonal fluctuations in business activities. It's used to ensure a continuous supply of raw materials during peak production seasons, maintaining smooth production processes.
Test: Working Capital- 1 - Question 4
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Which of the following is a characteristic of Gross Working Capital?
Detailed Solution for Test: Working Capital- 1 - Question 4
Gross Working Capital refers to the total current assets of a business concern. It's a general concept that represents the overall working capital position, but it doesn't consider the specific balance between current assets and liabilities. Unlike Net Working Capital, Gross Working Capital remains relatively constant irrespective of sales volume.
Test: Working Capital- 1 - Question 5
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Which type of Working Capital is required for the efficient use of fixed assets?
Detailed Solution for Test: Working Capital- 1 - Question 5
Permanent Working Capital, also known as Fixed Working Capital, is necessary for the efficient utilization of fixed assets. It ensures that the business maintains a minimum level of capital at all times to support its regular operations.
Test: Working Capital- 1 - Question 6
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What role does Working Capital play in maintaining employee morale?
Detailed Solution for Test: Working Capital- 1 - Question 6
Working Capital is crucial for paying employee wages and salaries on time. This regular and timely payment contributes to boosting employee morale and efficiency, as it reflects the company's financial stability and commitment to its workforce.
Test: Working Capital- 1 - Question 7
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What does an excessive level of Working Capital lead to?
Detailed Solution for Test: Working Capital- 1 - Question 7
Excessive Working Capital can result in unnecessary accumulation of raw materials, components, and spares. This can lead to higher storage costs, increased risk of obsolescence, and inefficiencies in resource utilization.
Test: Working Capital- 1 - Question 8
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What does Working Capital provide funds for during periods of crisis?
Detailed Solution for Test: Working Capital- 1 - Question 8
Working Capital provides necessary funds to meet unforeseen contingencies and helps the business navigate through periods of crisis. It ensures that the company has the financial resources to address unexpected challenges and maintain its operations.
Test: Working Capital- 1 - Question 9
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What does Inadequate Working Capital result in?
Detailed Solution for Test: Working Capital- 1 - Question 9
Inadequate Working Capital can make it difficult to implement operating plans and achieve profit targets. It might also lead to inefficient utilization of fixed assets and a reduced ability to purchase raw materials in bulk.
Test: Working Capital- 1 - Question 10
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Why is a healthy level of Working Capital necessary for goodwill?
Detailed Solution for Test: Working Capital- 1 - Question 10
A healthy level of Working Capital is required to maintain goodwill by ensuring timely payments to creditors. Prompt payments build a positive reputation for the business and enhance its creditworthiness in the market.
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