One of the such factors is the cash conversion cycle which immediately affects the liquidity of the organization. Finance that was amount of current assets required to meet a firm's long-term minimum needs are Free PDF Download of CBSE Business Studies Multiple Choice Questions for Class 12 with Answers Chapter 9 Financial Management. Current For example, decisions regarding cash or bill receivables are short term investment decisions. ________________________________________________________, 1. The Rate of return. The requirement of working capital depends on the nature of business. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming … Another important dimension of working capital management is determining the mix of finance for working capital which may be combination of spontaneous, short-term and long-term credit and other instance as the firm makes purchase of raw materials and supplies, trade credit is often made available spontaneously as per trade usage from the firm’s suppliers. between risk and profitability. Working capital also known as net working capital. Profit factor (Short term/Highly liquid)-  With short term financing the interest cost has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Working Capital Management Decision: Working capital management is concerned with management of a firm’s short-term or current assets, such as inventory, cash, receivables and short-term or current liabilities, such as creditors, bills payable. goods and keeps some cash in the bank and the office. Additionally, most capital projects will involve numerous variables and possible outcomes. and hence the interest costs could be low resulting in lesser interest expense any case if anything has to be repaid the business would have the finance Working capital management decision directly affects day to day business operations. With the arrangement of Equity. there is no threat of immediate repayment as the borrowing is long term and in (short term = working capital Financial Management) • Financing decisions involve: a) Decision whether or not to use a combination of ownership and borrowed funds. In other words, it refers to all aspects of administration of current assets and current liabilities. LOVELY PROFESSIONAL UNIVERSITY 1 Unit 1: Introduction to Financial Management Unit 1: … The optimal level of working capital The management of working capital involves managing inventories, accounts receivable and payable and cash. It wise decisions to decompose depreciated assets which are not adding value and utilize those funds in securing other beneficial assets. A business person usually sells on credit, stocks Net B) how the firm should finance its assets. C) which productive assets the firm should employ. Answer . Fixed Assets are $ 1,00,000. Oct 23 2011 08:02 PM. 36.Working capital management decisions involve A) how a firm's day-to-day financial matters should be managed. Students can solve NCERT Class 12 Business Studies Financial Management MCQs Pdf with Answers to know their preparation level. Any firm, from time to time, employs its short-term assets as well as short-term financing sources to carry out its day to day business. policies have lower expected, profitability (measured as return on The fixed capital decisions involve huge funds and also big risk because the return comes in long run and company has to bear the risk for a long period of time till the returns start coming. Demand for capital. Consequently, … Capital budgeting decisions generally involve, Financial markets in which equity and debt instruments with maturities greater than one, Profitability of a firm can be negatively affected by, About 75 percent of all businesses in the United States are, Which of the following business organizational forms subjects the owner(s) to, Which of the following business organizational forms creates a tax liability on income. Financial decisions involve procurement of funds and utilization of funds. refuse to renew. In this case Cash is not yet collected. We have to understand existing markets to forecast … The investment decisions can be classified under two broad groups: ADVERTISEMENTS: (i) Long-term investment decision and (ii) Short-term investment decision. anyway as the assets are highly liquid. The main sources for raising funds are shareholders' funds … Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. determining how a company will use the capital it raises to fund long term projects and ventures- decisions that involve long term assets. assets and current liabilities. Q2 How do current assets need to change as the volume of sales activity increases or decreases? Working capital is computed as the sum of: Inventories (+) Trade receivables (+) Cash (-) Trade payables. Combining Level of Current assets with Financing current assets and current liabilities and their relationship to the rest of Working capital managment involves decisions related to short-term assets and short-term liabilities, and these decisions typically will have an impact on the firms operations within a year. Short-term investment decisions or Working Capital Management means committing funds for a short period of time like current assets. Financial Decisions Involved in Financial Management. The management of working capital involves managing inventories, accounts receivable and payable, and cash. 1. of finance has to be arranged till Cash is collected for a short term. Working capital leverages. Working capital management involves making frequent decisions. ADVERTISEMENTS: 3. As these decisions involve huge funds and heavy cost and going back or reversing the decision may result in heavy loss … There may not be enough cash to meet, 4 - 14 out of 27 pages which. 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