BUSINESS FINANCE I Dersi Working Capital Management soru cevapları:
Toplam 23 Soru & Cevap#1
SORU:
What is working capital?
CEVAP: Working Capital basically refers to the money utilized by companies in their daily activities or operations. It is also defined as the available capital for day-to-day production of goods to be sold by a company represented by its net current assets (Adeniji, 2008).
Working Capital basically refers to the money utilized by companies in their daily activities or operations. It is also defined as the available capital for day-to-day production of goods to be sold by a company represented by its net current assets (Adeniji, 2008).
#2
SORU:
What is current liabilities in terms of capital?
CEVAP: The current liabilities are those claims to be paid in less than 1 year time. Current liabilities include but are not limited to short-term payables to bank loans, trade creditors, accruals, taxation payable, outstanding expenses, dividends payable.
The current liabilities are those claims to be paid in less than 1 year time. Current liabilities include but are not limited to short-term payables to bank loans, trade creditors, accruals, taxation payable, outstanding expenses, dividends payable.
#3
SORU:
What is a measure of a company’s liquidity and ability to survive in case the only funding source is current assets?
CEVAP:
It is Net Working Capital.
#4
SORU:
Which items are included in current assets?
CEVAP:
There are 7 items included in the current assets. These are:
- Cash in hand
- Cash in banks
- Accounts receivable
- Sundry debtors
- Inventories
- Prepaid expenses
- Accurues Income.
#5
SORU:
How many forms are there in the working capital in terms of the "time" perspective?
CEVAP: From the “time” perspective, the working capital is conceptualized in two different forms: Permanentand Temporary. Generally, each company, depending on the peculiarities of their business, has a stable amount of working capital requirement. The permanent working capital represents the minimum level of investment in the current assets that is carried by the business at all times to carry out its activities.
From the “time” perspective, the working capital is conceptualized in two different forms: Permanentand Temporary. Generally, each company, depending on the peculiarities of their business, has a stable amount of working capital requirement. The permanent working capital represents the minimum level of investment in the current assets that is carried by the business at all times to carry out its activities.
#6
SORU:
There are some factors affecting the level of working capital. What are these factors?
CEVAP:
These factors are;
- Nature of business
- Lenght of the period of manifacture
- Volume of business
- The proportion of the costs of raw material to total cost
- use of manual labor or mechanization
- Inventory level for raw materials of finished goods
- Turnover of working capital
- Terms of credit
- Short term financing options
- Seasonality of product demand
- Price level change
#7
SORU:
What is working capital management?
CEVAP: Working capital management is the process of dealing with the activities for maintaining adequate working capital and ensuring the financing for the working capital with the best available terms and conditions.
Working capital management is the process of dealing with the activities for maintaining adequate working capital and ensuring the financing for the working capital with the best available terms and conditions.
#8
SORU:
What are the dimensions of working capital management?
CEVAP:
There are four dimensions of working capital management. These are:
- Time
- Investment
- Credibility
- Growth
#9
SORU:
How many types of working capital policies are there?
CEVAP: Generally three types of working capital policies are accepted, Hedging Policy, Conservative policy and Aggressive policy.
Generally three types of working capital policies are accepted, Hedging Policy, Conservative policy and Aggressive policy.
#10
SORU:
What is hedging policy?
CEVAP: Hedging policy, which is also named as matching policy, proposes a strategy by which the fluctuating part of the current assets are financed by the current liabilities. Consequently, the fixed and permanent current assets are financed through long-term sources.
Hedging policy, which is also named as matching policy, proposes a strategy by which the fluctuating part of the current assets are financed by the current liabilities. Consequently, the fixed and permanent current assets are financed through long-term sources.
#11
SORU:
Which is the riskiest working capital financing policy?
CEVAP: Aggressive policy, as the name suggests, is specified as the most risky working capital financing policy as a higher proportion of current assets including permanent ones is financed by the short-term debt.
Aggressive policy, as the name suggests, is specified as the most risky working capital financing policy as a higher proportion of current assets including permanent ones is financed by the short-term debt.
#12
SORU:
What are the motives of companies in terms of holding cash?
CEVAP: The companies hold cash by different types of motivations:
- Transaction Motive explains holding cash or near cash to meet routine cash requirements of a company to finance transactions in the normal course of business such as purchasing raw materials, paying expenses, taxes, dividends etc.
- Precautionary Motive explains holding cash or near cash as a cushion to meet unexpected contingencies such as flood, strikes etc.
- Speculative motive explains the situations in which there occurs extra ordinary opportunities for the companies to quickly take advantage. For example, in order to be able to utilize the cash discount provided by a supplier, certain amount of cash can be made available as a strategy.
The companies hold cash by different types of motivations:
- Transaction Motive explains holding cash or near cash to meet routine cash requirements of a company to finance transactions in the normal course of business such as purchasing raw materials, paying expenses, taxes, dividends etc.
- Precautionary Motive explains holding cash or near cash as a cushion to meet unexpected contingencies such as flood, strikes etc.
- Speculative motive explains the situations in which there occurs extra ordinary opportunities for the companies to quickly take advantage. For example, in order to be able to utilize the cash discount provided by a supplier, certain amount of cash can be made available as a strategy.
#13
SORU:
What determines the level of liquidity?
CEVAP: The length of the company’s operating and cash conversion cycles determines the level of liquidity.
The length of the company’s operating and cash conversion cycles determines the level of liquidity.
#14
SORU:
What are the assumptions in Baumol's Economic order quantity model (EQQ)?
CEVAP: The Baumol model is based on the following assumptions:
- The cash is used evenly over a period of time.
- The cash requirements of the firm are known with certainty in advance.
- The transaction cost is known and isconstant.
- By holding the cash balances, the firm would incur the opportunity cost of interest forgone by not investing in marketable securities. The rate of carrying cost is known and is assumed to be constant.
- The short term marketable securities can be freely bought and sold.
The Baumol model is based on the following assumptions:
- The cash is used evenly over a period of time.
- The cash requirements of the firm are known with certainty in advance.
- The transaction cost is known and isconstant.
- By holding the cash balances, the firm would incur the opportunity cost of interest forgone by not investing in marketable securities. The rate of carrying cost is known and is assumed to be constant.
- The short term marketable securities can be freely bought and sold.
#15
SORU:
What is inventory management?
CEVAP: Inventory management aims to keep the inventories on optimal level, without stock- outs and excesses, by organizing, holding and replenishments for each item.
Inventory management aims to keep the inventories on optimal level, without stock- outs and excesses, by organizing, holding and replenishments for each item.
#16
SORU:
What are the kinds of inventories?
CEVAP: Inventories can be classified into five major categories:
- Raw Material: It is the basic and the most important part of inventories. These are goods directly or used in the production process, and the expenses incurred for the procurement of raw materials are reflected to the cost per unit of product.
- Work in Progress: These include those materials which have been committed to production process but have not yet been completed.
- Consumables: These are the materials which are needed for smooth running of the manufacturing process.
- Finished Goods: These are the final output of the production process.
- Spares: It is also a part of inventories, which includes small spares and parts.
- Transaction costs
Inventories can be classified into five major categories:
- Raw Material: It is the basic and the most important part of inventories. These are goods directly or used in the production process, and the expenses incurred for the procurement of raw materials are reflected to the cost per unit of product.
- Work in Progress: These include those materials which have been committed to production process but have not yet been completed.
- Consumables: These are the materials which are needed for smooth running of the manufacturing process.
- Finished Goods: These are the final output of the production process.
- Spares: It is also a part of inventories, which includes small spares and parts.
- Transaction costs
#17
SORU:
How can "safety stock" be defined?
CEVAP: Safety stock implies extra inventories that can be drawn down when actual lead time and/or usage rates are greater than expected. Safety stocks are determined by opportunity cost and carrying cost of inventories.
Safety stock implies extra inventories that can be drawn down when actual lead time and/or usage rates are greater than expected. Safety stocks are determined by opportunity cost and carrying cost of inventories.
#18
SORU:
What does EQQ refer to and how can it be explained?
CEVAP: EOQ is the short form of Economic Order Quantity and it refers to the level of inventory that minimizes total cost of inventory ordering cost and carrying cost.
EOQ is the short form of Economic Order Quantity and it refers to the level of inventory that minimizes total cost of inventory ordering cost and carrying cost.
#19
SORU:
What are some of the major methods of inventroy valuation?
CEVAP: Some of the major methods of inventory valuation are:
- First in First Out Method (FIFO)
- Last in First Out Method (LIFO)
- Highest in First Out Method (HIFO)
- Nearest in First Out Method (NIFO)
- Average Price Method
Some of the major methods of inventory valuation are:
- First in First Out Method (FIFO)
- Last in First Out Method (LIFO)
- Highest in First Out Method (HIFO)
- Nearest in First Out Method (NIFO)
- Average Price Method
#20
SORU:
There are four types of costs of maintaining receivables. What are these costs?
CEVAP: There exist many types of costs incurred in the course of receivables management, these are;
- Administrative cost
- Capital cost
- Delinquency cost
- Default cost
There exist many types of costs incurred in the course of receivables management, these are;
- Administrative cost
- Capital cost
- Delinquency cost
- Default cost
#21
SORU:
What is the credit policy?
CEVAP: A credit policy establishes guidelines to follow in the decision to grant or reject credit to a customer as well as the terms and conditions of the grant. By that definition, it directly affects the volume of investment a company makes in receivables. It should be prepared by the involvement of sales and finance managers of the company by taking into account the requirements of competition, industry and general economic conditions.
A credit policy establishes guidelines to follow in the decision to grant or reject credit to a customer as well as the terms and conditions of the grant. By that definition, it directly affects the volume of investment a company makes in receivables. It should be prepared by the involvement of sales and finance managers of the company by taking into account the requirements of competition, industry and general economic conditions.
#22
SORU:
What does short-term financing refer to?
CEVAP: Short-term financing refers to borrowing funds or raising credit for a maximum of 1 year period.
Short-term financing refers to borrowing funds or raising credit for a maximum of 1 year period.
#23
SORU:
What are the financing alternatives that firms may create?
CEVAP: The firms may create financing alternatives from internal (mainly in the form of accruals) and external sources:
- Accruals
- Trade credit
- Working capitaladvance by commercial banks
- Letter of credit
- Factoring
The firms may create financing alternatives from internal (mainly in the form of accruals) and external sources:
- Accruals
- Trade credit
- Working capitaladvance by commercial banks
- Letter of credit
- Factoring