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B Com Exam  >  B Com Tests  >  Test: Financial Planning and Administration - 2 - B Com MCQ

Test: Financial Planning and Administration - 2 - B Com MCQ


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10 Questions MCQ Test - Test: Financial Planning and Administration - 2

Test: Financial Planning and Administration - 2 for B Com 2024 is part of B Com preparation. The Test: Financial Planning and Administration - 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Financial Planning and Administration - 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Financial Planning and Administration - 2 below.
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Test: Financial Planning and Administration - 2 - Question 1
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What is the formula for calculating working capital?

Detailed Solution for Test: Financial Planning and Administration - 2 - Question 1
Working capital is calculated by subtracting current liabilities from current assets. Current assets include items like cash, accounts receivable, and inventory, while current liabilities include short-term debts and accounts payable. This calculation helps measure a company's liquidity and ability to cover its short-term financial obligations.
Test: Financial Planning and Administration - 2 - Question 2
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What is the primary goal of working capital management?

Detailed Solution for Test: Financial Planning and Administration - 2 - Question 2
The primary goal of working capital management is to ensure that a company can meet its short-term financial obligations, including paying off short-term debt and covering operational expenses.
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Test: Financial Planning and Administration - 2 - Question 3
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What is the working capital cycle?

Detailed Solution for Test: Financial Planning and Administration - 2 - Question 3
The working capital cycle represents the time it takes for a company to convert its net current assets (current assets minus current liabilities) into cash. It involves various stages from purchasing raw materials to selling finished products and collecting payments.
Test: Financial Planning and Administration - 2 - Question 4
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Why do funders prefer to see a positive working capital in a company?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 4
Funders prefer to see a positive working capital because it indicates that the company has sufficient current assets to cover its financial obligations, ensuring it can meet short-term debts and expenses.
Test: Financial Planning and Administration - 2 - Question 5
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What does a positive working capital indicate about a company?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 5
A positive working capital indicates that a company has more current assets than current liabilities. It suggests that the company is in a good financial position to cover its short-term obligations and is effectively managing its finances.
Test: Financial Planning and Administration - 2 - Question 6
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What is one strategy for managing working capital when it's negative?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 6
One strategy for managing negative working capital is to negotiate longer credit terms with suppliers, allowing the company more time to collect payments from customers while delaying payments to suppliers.
Test: Financial Planning and Administration - 2 - Question 7
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Which factor affects the working capital requirements of a business based on the nature of its business?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 7
The working capital requirements of a business can be influenced by its production policy. For example, a company that accumulates inventories during slack periods may require higher working capital to maintain those inventories.
Test: Financial Planning and Administration - 2 - Question 8
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What is the purpose of raising short-term funds through commercial paper (CP)?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 8
The primary purpose of raising short-term funds through commercial paper (CP) is to cover the operational expenses and meet the working capital requirements of a company.
Test: Financial Planning and Administration - 2 - Question 9
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What does the maturity period of commercial paper typically range between?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 9
Commercial paper typically has a maturity period that ranges from 30 to 270 days. It is a short-term money market instrument.
Test: Financial Planning and Administration - 2 - Question 10
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What is the tangible net worth requirement for a company to issue commercial paper in India as per RBI guidelines?
Detailed Solution for Test: Financial Planning and Administration - 2 - Question 10
As per RBI guidelines in India, a company is required to have a minimum tangible net worth of 50 million to issue commercial paper. This ensures that only financially stable companies can issue CP.
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