(a) Explain the following factors affecting the working capital requirement of a company :
(i) Level of competition
(ii) Production cycle
(iii) Scale of operations
(i) Level of competition
(ii) Production cycle
(iii) Scale of operations
Show Hint
Solution and Explanation
(i) Level of Competition: If a firm is in a highly competitive market, it may require additional working capital to offer better customer services, maintain larger inventories, or give credit to customers to stay competitive.
(ii) Production Cycle: The time taken to convert raw materials into finished goods affects working capital. Longer production cycles need more funds tied up in inventory, increasing working capital needs.
(iii) Scale of Operations: Large-scale businesses need more working capital to manage raw materials, production, and distribution. Bigger firms typically maintain greater inventories and have higher overheads.
Final Answer: More competition, longer production, and large operations = higher working capital.
Top Questions on Financial Management and Financial Market
- Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from the options given below:
Assertion (A): When the allocative function is performed well, scarce resources are allocated to those firms which have the highest productivity for the economy.
Reason (R): Allocative function allocates or directs funds into their most productive investment opportunity.- CBSE CLASS XII - 2025
- Business Studies
- Financial Management and Financial Market
- (a) Explain the following factors affecting choice of capital structure of a company:
(i) Return on Investment
(ii) Floatation Costs
(iii) Flexibility
OR
(b) Explain the following factors affecting working capital requirement of a company:
(i) Nature of business
(ii) Business cycle
(iii) Inflation- CBSE CLASS XII - 2025
- Business Studies
- Financial Management and Financial Market
- (a)Give the meaning of ‘Contract Note’ and ‘T+2’ system in the trading procedure in a stock exchange.
OR
(b)State any three regulatory functions of Securities and Exchange Board of India.- CBSE CLASS XII - 2025
- Business Studies
- Financial Management and Financial Market
- ‘Mudro Infratech’ got a short-term contract for building two villas within a period of ten months with the expectation to earn a huge amount of profit. The profit of the company went up by 40% due to this temporary order. The Finance Manager knew that this was not a regular or sustainable source of income. So, he decided not to increase dividend per share. The factor affecting Dividend Decision being highlighted above is:
- CBSE CLASS XII - 2025
- Business Studies
- Financial Management and Financial Market
- (a) Explain the following factors affecting the requirement of fixed capital of a company:
- [(i)] Choice of technique
- [(ii)] Financing alternatives
- [(iii)] Growth prospects
- [(i)] Cost of equity
- [(ii)] Control
- [(iii)] Stock market conditions
- CBSE CLASS XII - 2025
- Business Studies
- Financial Management and Financial Market
Questions Asked in CBSE CLASS XII exam
Let \(\mathbf{a}, \mathbf{b}\) and \(\mathbf{c}\) be three vectors such that $\mathbf{a} \times \mathbf{b} = \mathbf{a} \times \mathbf{c} \text{ and } \mathbf{a} \times \mathbf{b} \neq 0 \text{ Show that } \mathbf{b} = \mathbf{c}$.
A carpenter needs to make a wooden cuboidal box, closed from all sides, which has a square base and fixed volume. Since he is short of the paint required to paint the box on completion, he wants the surface area to be minimum.
On the basis of the above information, answer the following questions :
Find \( \frac{dS}{dx} \).- CBSE CLASS XII - 2025
- Differentiation
- If \( x = e^{\frac{x}{y}} \), then prove that \( \frac{dy}{dx} = \frac{x - y}{x \log x} \).
- CBSE CLASS XII - 2025
- Differentiation
Bittu and Chintu were partners in a firm sharing profit and losses in the ratio of 4:3. Their Balance Sheet as at 31st March, 2024 was as
On $1^{\text {st }}$ April, 2024, Diya was admitted in the firm for $\frac{1}{7}$ share in the profits on the following terms:
- New profit sharing ratio between Bittoo, Chintoo and Diya will be $3:3:1$.
- Fixed Assets were found to be overvalued by ₹ 1,40,000.
- Creditors were paid ₹ 4,20,000 in full settlement.
- Diya brought proportionate capital and ₹ 5,60,000 as her share of goodwill premium by cheque.
Prepare Revaluation Account and Partners' Capital Accounts.
- CBSE CLASS XII - 2025
- Profit and Loss Account
Bittu and Chintu were partners in a firm sharing profit and losses in the ratio of 4 : 3. Their Balance Sheet as at 31st March, 2024 was as follows:
On 1st April, 2024, Diya was admitted in the firm for \( \frac{1}{7} \)th share in the profits on the following terms:- (i) New profit sharing ratio between Bittu, Chintu and Diya was 3 : 3 : 1 .
- (ii) Fixed Assets were found to be overvalued by ₹ 1,40,000.
- (iii) Creditors were paid ₹ 4,20,000 in full settlement.
- (iv) Diya brought proportionate capital and ₹ 5,60,000 as her share of goodwill premium by cheque.
Prepare Revaluation Account and Partners' Capital Accounts.
- CBSE CLASS XII - 2025
- Partnership Accounts