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MS-41 Solved Assignment

MS-41 Solved Assignment

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  • Version: 2021 Jan - June

Soft Copy: Yes
Downloadable File: Yes
University: IGNOU
Course: Master of Business Administration

Q&A of Mba MS-41 Solved Assignment 2021 - Working Capital Management

Q. Take the latest monetary policy and discuss the important highlights of this policy.


Q. You are required to prepare a Cash Budget for the months of May, June and July 2021 on the basis of the information given below:
(a) Income and Expenditure Forecasts
Months Credit Sales Credit Purchases Wages Manufacturing Expenses Office Expenses Selling Expenses
March 60,000 36,000 9,000 4,000 2,000 4,000
April 62,000 38,000 8,000 3,000 1,500 5,000
May 65,000 33,000 10,000 4,500 2,500 4,500
June 58,000 35,000 8,500 3,500 2,000 3,500
July 56,000 39,000 9,500 4,000 1,000 4,500
August 60,000 34,000 8,000 3,000 1,500 4,500

(b) Cash balance on 1st May, 2021 is Rs 8,000.
(c) Plant costing Rs 16,000 is due for delivery in July, payable 10% on delivery and the balance after 3 months.
(d) Advance tax of Rs 8,000 each is payable in March and June.
(e) Period of credit allowed
(i) by suppliers - two months, and
(ii) to customers - one month.
(f) Lag in payment of manufacturing - 1/2 months.
(g) Lag in payment of office and selling expenses - one month

Answer. .........

Q. As a Finance Manager what are the sources that you would prefer to raise short term loans from the money market for meeting working capital needs of your business and why?

Q. XYZ Ltd. is in the business of manufacturing water filters. The current ratio at the end of the last year was 3:1 which appeared to be comfortable. However, the cash flow position, is rather weak and the company finds it difficult to make payments to the suppliers and workers on time. The composition of working capital as per the last balance sheet is provided here:

Current Assets:
Inventories 18,00,000
Receivables 12,00,000
Cash and bank balances 1,00,000
Loans and advances 20,00,000
Current Liabilities 17,00,000

Mention specific possibilities of what might be causing cash flow difficulties in this context. Suggest any better ratios which the company might use to gauge its liquidity in future.


Product Details: MS-41 Solved Assignment 2021 - Working Capital Management

Course: Ignou MBA (Master of Business Administration)
Session: Jan - June 2021

Old Sample Answers of Mba Ignou MS-41 Assignments

Q. What is Working Capital?
Answer. Working capital is a measure of a company's current assets less its current liabilities........... The management of working capital is a crucial element of cash flow management......
Managing working capital is essential for success, as the ability to avoid a cash crisis and pay debts as they fall due depends on managing
Receivables, through effective credit approval, invoicing, and collection activity
Inventory, through effective ordering, storage, and identification of inventory Payables, by negotiation of trade terms and through taking advantage of prompt-payment discounts
Cash, by effective forecasting, short-term borrowing, and/or investment of surplus cash where possible
The working capital cycle works (at least in theory) as follows: a firm will purchase inventory (either as finished goods or as raw materials) on credit from its suppliers (appearing as creditors in the working capital)...... After production has taken place the finished goods will be sold on to customers as either cash or credit sales (now appearing as trade receivables in the working capital)........... The firm will eventually receive the cash from these credit customers, which in turn can then be used to settle the amounts owing to the credit suppliers as well as any other obligations it has run up during this period, such as wages and other expenses.......... Get Ignou Mba MS-41 Solved Assignment 2021 Jan - June Working Capital Management..........
A firm will wish to minimize the length of its working capital cycle. The longer a firm holds inventories and the longer a firm takes to collect cash from its customers in respect of credit sales, the more likely a firm will face liquidity problems........ Therefore a firm will want to minimize the time cash is tied up in working capital, so as to avoid potential difficulties with cash flow.
The working capital cycle also known as the firm's operating cycle can also be measured in terms of the time taken for money to pass through each stage of the working capital. The operating cycle for its working capital will consist of the following timings for cash being tied up in the various stages of the working capital cycle.........
The objective of working capital management by all the firms is to provide enough liquidity so that production process continues smoothly during the normal course of the business.......... Further, the focus is to maintain an optimum level of current assets so that funds of the firm do not remain unnecessarily idle.......... The finance manager aims at efficiently managing the current assets and liabilities to meet the firm's working capital requirement. Inefficient working capital management may lead to higher cost of funds and may increase the risk profile of the firm.

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