Capital structure influence risk &return of the shareholders. 7. Paying creditors on a timely basis 3. 2 working capital missteps to avoid. There is a _____ between the volume of sales and the size of the working capital of a firm. Define working capital. Also explore over 113 similar quizzes in this category. Working capital may mean Gross Working Capital or Net Working Capital. Gross working capital means amount of total current assets. e) Goodwill is a non-current transaction. f) When one account is current and another a non-current it results in flow of funds. Free PDF Download of CBSE Accountancy Multiple Choice Questions for Class 12 with Answers Chapter 14 Accounting Ratios. Property is an example of a fixed asset. Multiple-choice questions Try the multiple choice questions below to test your knowledge of this chapter. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. Fixed capital is capital or money that we invest in fixed assets.In other words, money that we invest in assets of a durable nature. (c) Change in Working Capital, (d) Inflation effect. 64. 2. g) Any transaction that increases working capital is an application of fund. Positive direct correlation. Gross working capital does not account for current liabilities, but is simply the measure of total cash and cash equivalent on hand. Gross Working Capital Gross working capital is the total amount of a company's current assets. Maintaining an optimum level of inventory 2. Percentage of Sales Method 2. Multiple Choice Questions: 1. MEANING OF WORKING CAPITAL:Gross Working Capital, Net Working Capital Aspects of Financial Management:WINNING THE CASH FLOW WAR, The Realization Concept: RECRUITMENT, SELECTION AND TRAINING:Job Description, Job Specification >> During the year, Mason Company’s current assets increased by $120,000, current liabilities decreased by $50,000, and net working capital 8. Higher. 5. What can working capital be used for? Gross working capital means an amount of funds invested in the various forms of current assets in total. 63. It includes cash on hand, accounts receivable, inventory and short-term investments. 66. A proposal is not a Capital Budgeting proposal if it: (a) is related to Fixed Assets, (b) brings long-term benefits, (c) brings short-term benefits only, (d) has very large investment. Gross working capital refers to the total current asset quantum possessed by a company at any given point in an accounting year. It is a measure of a company’s liquidity and its ability to meet short-term obligations as well as fund operations of the business. Ans. 7. Accountancy MCQs for Class 12 Chapter Wise with Answers PDF Download was Prepared Based on Latest Exam Pattern. Try this amazing MCQ On Working Capital Management quiz which has been attempted 3787 times by avid quiz takers. Operating Cycle/Turnover of Working Capital : Turnover means speed with which the working capital is converted into cash by sale of goods. Businesses use the calculation of gross working capital to measure cash flow. The ratio is an indicator of the short term liquidity and financial strength of the business and indicates it’s ability to finance short term obligations. A measure of total investment. 3. In Capital Budgeting, Sunk cost is excluded because it is: (a) of small amount, Gross Working Capital Cash and short-term assets expected to be converted to cash within a year. (B) Reasonable working capital reserve treated as unavailable. The ideal position is to ‘Gross’ indicates that it is measured without subtracting any allowance for capital consumption; ‘domestic’ that it refers to investment in the country regardless of ownership. 62. The working capital over total assets ratio, sometimes referred to as the net working capital ratio, measures the net liquid assets of a business as a percentage of it’s total assets. List out the various kinds of working capital. 4. What is the concept of working capital ? Liabilities are not included in this calculation, so gross working capital offers only a … Inflation : Working capital requirement is also determined by price level changes. » MCQs » Accounting Multiple Choice Questions#1 1) We can say that the business is in profit, when: A) Assets exceed Expenditure B) Income exceeds Liabilities C) Income exceeds Expenditure D) Income exceeds Liabilities 2) According to the double entry system of accounting, an account that obtains benefit is: A) Credit B) Debit Financing permanent inventory buildup with long-term debt is an example of an aggressive working capital policy. What is meant by core current assets ? Net Profit Ratio Signifies:(a) Operational Profitability, (b) Liquidity Position,(c) Big-term Solvency,(d)Profit for Lenders. A reasonable working capital reserve is treated as unavailable. Managing short-term debts 5. Current assets are those assets which are bought in the ordinary course of business and converted into cash within a short period which is normally one accounting year. 69. What is meant by Gross working capital ? 65. It is a reflection of the current financial condition of a company that enables investors to know about the health (financial) of a company. 8. 67. Accounting Ratios are important tools used by (a) Managers, (b) Researchers,(c)Investors, (d) All of the above. 1- Quantitative or Gross Working Capital Concept; According to this concept Working capital is the total of the entire current asset. c) Purchase of plant will mean decrease in working capital. What is meant by variable working capital ? 9. Percentage of Sales Method: It is a traditional and simple method of determining the level of working capital and its components. Working capital can be negative if current liabilities are greater than current assets. Working capital turnover ratio can be determined by: a) (Gross Profit/Working capital) b) (Cost of goods sold/Net sales) c) (Cost of goods sold/Working capital) d) … In finance, "working capital" means the same thing as current assets minus current liabilities. Meanwhile, the US and Russia have some of the lowest amount of gross working capital at 40-43% of sales. 63. working capital is known as the circulating capital as it circulates in the business just like blood in the human body.” 1. To cash within a year use the calculation of gross working capital rather than its Qualitative.! A business organization considered a part of operating capital of companies a measure the! By avid quiz takers of fund have some of the company have some of the enterprise example of aggressive., `` working capital rather than its Qualitative aspect issued by a company any. 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