Management of Working Capital

Amounts are Rs lakh unless another unit is specified. 30 original practice MCQs, 2 marks each. Practice and separate-test stems differ. Standalone drills across the chapter, with a separate case-based test pack.

Original practice, not official ICAI questions or suggested answers. Scores are temporary and not synced to Study Hub. Contract/current-rule/accounting/tax boundaries are included in the review pack.

Not scored yet.

FM-C09-P001 · 2 marks

CA 75, current liabilities 60 lakh. Net WC?

A. 15 lakh. B. 60 liabilities. C. 135 lakh. D. 75 gross WC.

Explanation

Correct answer A: 15 lakh.

CA minus CL.

FM-C09-P002 · 2 marks

Positive NWC alone proves which?

A. It does not guarantee payment of every imminent obligation. B. Every current asset is immediate cash. C. No collection risk exists. D. All due liabilities are covered in cash.

Explanation

Correct answer A: It does not guarantee payment of every imminent obligation.

Composition, maturity and availability matter.

FM-C09-P003 · 2 marks

Minimum CA 20, seasonal peak 35 lakh. Temporary increment?

A. 20 permanent base. B. 55 lakh. C. 15 lakh. D. 35 only.

Explanation

Correct answer C: 15 lakh.

Peak minus minimum.

FM-C09-P004 · 2 marks

RM 30/WIP 10/FG 20/debtors 40/payables 25 days. Net cycle?

A. 125 days. B. 100 gross cycle. C. 25 days. D. 75 days.

Explanation

Correct answer D: 75 days.

30+10+20+40-25.

FM-C09-P005 · 2 marks

Net cycle 75 days, 360-day year. Named net cycles per year?

A. 4.8. B. 75. C. 3.6 from 100 gross days. D. .2083.

Explanation

Correct answer A: 4.8.

360/75; do not mix gross and net labels.

FM-C09-P006 · 2 marks

Average RM 12, annual consumption 144 lakh, 360 days. RM days?

A. 12. B. 30. C. 10. D. 360.

Explanation

Correct answer B: 30.

12/144 x 360.

FM-C09-P007 · 2 marks

Annual 120000 units, WIP 15 days, 360 year; cash WIP cost 42 rupees/unit. Funding value?

A. .21 lakh. B. 5 lakh. C. 2.1 lakh. D. 3 lakh full 60 cost.

Explanation

Correct answer C: 2.1 lakh.

5000 units x 42=210000.

FM-C09-P008 · 2 marks

Annual credit sales 240, variable 60%, 30 day collection, 360 year. Variable-cost debtors funding?

A. 12 lakh. B. 7.2 lakh. C. 20 ledger sales value. D. 144 annual variable cost.

Explanation

Correct answer A: 12 lakh.

240 x.6 x 30/360.

FM-C09-P009 · 2 marks

Same funded debtors 12 lakh, annual carrying 12%. Annual charge?

A. 2.4 on ledger 20. B. .12 lakh. C. 1.44 lakh. D. 12 lakh.

Explanation

Correct answer C: 1.44 lakh.

12 x.12.

FM-C09-P010 · 2 marks

Annual material credit purchases 40 lakh, supplier 24 days, 360 year. Payables funding?

A. 2.666667 lakh. B. 1.666667. C. 40 lakh. D. 3.333333 at 30 days.

Explanation

Correct answer A: 2.666667 lakh.

40 x 24/360.

FM-C09-P011 · 2 marks

Annual wages 20 lakh, payment lag 9 days, 360 year. Accrued wages?

A. 20 lakh. B. .5 lakh. C. 5 lakh. D. 1 lakh.

Explanation

Correct answer B: .5 lakh.

20 x 9/360; ordinary agreed lag, not overdue extension.

FM-C09-P012 · 2 marks

Conservative CA 80/fixed 100/profit 20 ignoring finance/tax. Stated total asset return?

A. 14.2857% aggressive case. B. 11.1111%. C. 20% on fixed only. D. 25% on CA only.

Explanation

Correct answer B: 11.1111%.

20/180.

FM-C09-P013 · 2 marks

Permanent 40, seasonal 20 for 3 months; long 10%/short 8%. Matching annual cost?

A. 6 conservative gross cost. B. 5.6 full-year seasonal cost. C. 4 lakh ignores seasonal funds. D. 4.4 lakh.

Explanation

Correct answer D: 4.4 lakh.

40 x.1+20 x.08 x.25.

FM-C09-P014 · 2 marks

Cash opening 12, receipts 20, payments 35, min 5. Hypothetical minimum borrowing?

A. 5 minimum cash only. B. No borrowing needed. C. 3 only to zero. D. 8 lakh.

Explanation

Correct answer D: 8 lakh.

Pre-finance-3, need 8 to close 5.

FM-C09-P015 · 2 marks

Daily collections Rs 200000, lag cut 2 days. Freed cash stock?

A. Rs 40000 annual interest. B. Rs 200000. C. Rs 72000000. D. Rs 400000.

Explanation

Correct answer D: Rs 400000.

Daily flow times days, not an annual cash inflow repeated daily.

FM-C09-P016 · 2 marks

Baumol U 1200000, transfer 50 rupees, annual rate 12%. C?

A. Rs 15811.3883 average. B. Rs 31622.7766. C. Rs 1200000. D. Rs 100000.

Explanation

Correct answer B: Rs 31622.7766.

sqrt(2 Ub/i); basic replenishment size.

FM-C09-P017 · 2 marks

Basic Baumol C 31622.7766, no safety balance. Average cash?

A. Rs 63245.5532. B. Rs 0. C. Rs 31622.7766. D. Rs 15811.3883.

Explanation

Correct answer D: Rs 15811.3883.

C/2 under uniform depletion.

FM-C09-P018 · 2 marks

Miller-Orr lower 10000, return 25000, upper 55000. At upper, transfer to securities?

A. Rs 15000 low-trigger amount. B. Rs 30000. C. No transfer at upper. D. Rs 55000 leaving zero.

Explanation

Correct answer B: Rs 30000.

Upper minus return point.

FM-C09-P019 · 2 marks

Same limits; at cash 40000 inside band, stipulated action?

A. Always return 25000 every day. B. Invest 15000 automatically. C. No control-limit transfer. D. Replenish 15000.

Explanation

Correct answer C: No control-limit transfer.

Transfer only at trigger limits in this case.

FM-C09-P020 · 2 marks

Supplied EOQ demand 12000, order cost 100, holding 4 rupees/unit-year. Quantity?

A. 1549.1933 cost. B. 774.596669 units. C. 387.298335 average. D. 12000 units.

Explanation

Correct answer B: 774.596669 units.

sqrt(2 DS/H); FM inventory unit refers elsewhere for detail.

FM-C09-P021 · 2 marks

Supplied reorder max use 140/max lead 7; average 100/normal lead 5. Minimum stock?

A. 700. B. 500 normal lead use. C. 980 reorder. D. 480 units.

Explanation

Correct answer D: 480 units.

980-500; not a stockout probability estimate.

FM-C09-P022 · 2 marks

Credit sales 100 to 120, variable 60%, bad debts 1% to 3%. Incremental expected profit before funding/tax?

A. 8 contribution change only. B. 5.4 lakh. C. 4.8 after specified funding charge. D. 2.6 extra bad debts only.

Explanation

Correct answer B: 5.4 lakh.

8-(3.6-1).

FM-C09-P023 · 2 marks

Old cost-funded debtors 5, new 9, required return 15%. Incremental annual carrying cost?

A. 4 lakh released. B. .75 old charge. C. .6 lakh. D. 1.35 new total charge.

Explanation

Correct answer C: .6 lakh.

Extra 4 x.15.

FM-C09-P024 · 2 marks

Sales 200, new 1% discount taken by 60%. Annual discount cost?

A. 1.2 lakh. B. .7 financing saving. C. 120 lakh eligible sales as cost. D. 2 lakh all sales.

Explanation

Correct answer A: 1.2 lakh.

200 x.6 x.01.

FM-C09-P025 · 2 marks

Receivables 50; 61-90 days 5/over 90 days 5. Over 60 share?

A. 20%. B. 40%. C. 10% over 90 alone. D. 60% current.

Explanation

Correct answer A: 20%.

10/50.

FM-C09-P026 · 2 marks

Factor has recourse and reserve but advertises not a loan. Which is safe?

A. Label guarantees derecognition. B. Every factoring arrangement is full cash without fees. C. Recourse cannot matter. D. Inspect substantive risk/control/repayment and accounting terms; no automatic no-liability claim.

Explanation

Correct answer D: Inspect substantive risk/control/repayment and accounting terms; no automatic no-liability claim.

Contract substance and actual standards matter.

FM-C09-P027 · 2 marks

Invoice 10000, 2/10 net 45. Discounted amount at day 10?

A. 10000 no discount. B. 200 discount as entire payment. C. 9800 rupees. D. 10 rupees per 100.

Explanation

Correct answer C: 9800 rupees.

98% of invoice; source wording error held.

FM-C09-P028 · 2 marks

Same invoice, loan 9800 at 12% simple 35 days, 360 year. Interest?

A. 1176 full-year interest. B. 114.333333 rupees. C. 200 foregone discount. D. 85.666667 saving.

Explanation

Correct answer B: 114.333333 rupees.

9800 x.12 x 35/360.

FM-C09-P029 · 2 marks

Hypothetical CP face 100/proceeds 95, maturity 180 days, 360 year. Borrower simple annual cost?

A. 10.803324% compounded effective. B. 10% face discount annualised. C. 10.526316%. D. 5.263158% period cost only.

Explanation

Correct answer C: 10.526316%.

5/95 x 2; period/basis stated.

FM-C09-P030 · 2 marks

Inventory 40 eligible 75%, debtors 30 eligible 80%, sanction 50, draw 20. Additional hypothetical room?

A. 30 lakh. B. 50 entire limit. C. 34 ignores sanction cap. D. 54 eligible stock.

Explanation

Correct answer A: 30 lakh.

Min(30+24, 50)-20.