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MS-41 Solved Assignment

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  • Version: 2020 Jan - June

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

Q&A of Mba MS-41 Solved Assignment 2020 - Working Capital Management

Q. Explain the meaning of Working Capital. How does inflation affect the size of working capital, availability of working capital, and various components of working capital.


Q. An Enterprises' current turnover is Rs. 10 lakh per annum. The enterprise currently allows a credit period of 40 days to its customers from the date of sale. The management of this enterprise wishes to adopt a more liberal credit policy, and it is exploring the following options:
Credit policy Proposed increase in collection period (days) Expected increase in sales (Rs) Anticipated default rate
or rate of bad debt (%)
I 10 40,000 2%
II 20 50,000 2.5%
III 30 70,000 3%
IV 40 90,000 4%
Additional information
Selling price/unit is Rs 5.00
Average cost/unit is Rs 3.00
Variable costs/unit is Rs 2.00
Current default rate is 1.5%
Required rate of return is 15%
A year consists of 360 days
You are required to suggest which of the above credit policies should be followed?

Answer. .........

Q. Taking a suitable example explain how maximum permissible bank finance is assessed under the three methods of lending suggested by the Tandon Committee.

Q. "Capital Investment Module and Working Capital Module use simulation techniques to represent the interactions among the capital investment and working capital variables" Discuss.


Product Details: MS-41 Solved Assignment 2020 - Working Capital Management

Course: Ignou MBA (Master of Business Administration)
Session: Jan - June 2020

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 2020 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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