IGNOU MS-41 - Working Capital Management

1. Select any two firms from the same industry and collect their Financial Statements for the years 2022-2023 & 2023-2024, and calculate their Efficiency, Liquidity and Structural Ratios. Based on these ratios give your views on the working capital management of these firms. 2. The company XYZ Ltd has annual sales of Rs. 50 lakhs and is currently extending 30 days’ credit to the dealers. It is considering change in credit policy and the following information is available: The average collection period now is 30 days. Costs: Variable Cost: 80 percent on sales Fixed Cost: Rs. 6 lakhs per annum Required (pre-tax) return on investment: 20 percent You are required to recommend as to which of the policies given above should be adopted by XYZ Ltd. What are the assumptions you have made for coming to such decision? 3. Visit any Bank of your choice and study the methods of Appraisal that the Bank follows while extending Credit Facility to the Business Houses. Write a detail note on your findings. 4. ‘Working Capital Module simulates the integration of working capital components into the Capital Investment (CI) process’. Give the objectives and explanation of the operation of each module that forms a part of the working capital – capital investment process. Also highlight the sequential operation of the WC module.

1. Discuss the various factors that you would take into consideration before assessing the working capital requirements. 2. You are required to prepare a Cash Budget of XYZ Ltd. for the months April, 2023 to July, 2023 (four months) from the details given below: (a) Estimated sale during 2023 b) On an average 20% of sales are cash sales. The credit sales are realized in the third month (January sales in March). c) Purchases amount to 60% of sales. d) Variable expenses (other than sales commission) constitute 10% of sales and there is a time lag of half a month in these payments. e) Commission on sales is paid at 5% of sales value and payment is made in the third month. f) Fixed expenses per month amount to Rs. 75,000 approximately. 3. As a Finance Manager, which sources you would prefer to raise short term loans from the money market for meeting working capital needs of your business and why? 4. The Balance Sheet of Alpha Co. Ltd. is as given below. You are required to calculate the amount of maximum permissible bank finance by all three methods for working capital as per Tandon Committee Norms. Assume the level of core current assets to be Rs. 60 lakhs. Calculate the current ratios as recommended by the committee, assuming that the bank has granted MPBF. 5. If you are finance manager of an MNC, what circumstances would you consider using Eurocurrency markets? Also explain why you have selected these markets instead of borrowing from domestic markets.