There is a _____ between the volume of sales and the size of the working capital of a firm. Working capital is a measure of the operational efficiency, liquidity and short-term financial health or solvency of the company. Working capital turnover ratio can be determined by: a) (Gross Profit/Working capital) b) (Cost of goods sold/Net sales) c) (Cost of goods sold/Working capital) d) … Gross Profit Vs Operating Profit Gross Profit The word Gross means “before any deductions”. Ans. These are assets that we repeatedly use over a long period. List out the various kinds of working capital. 67. Property is an example of a fixed asset. This view places more emphasis on the quantitative aspect of working capital rather than its Qualitative aspect. Percentage of Sales Method: It is a traditional and simple method of determining the level of working capital and its components. 3. Working capital can be negative if current liabilities are greater than current assets. In finance, "working capital" means the same thing as current assets minus current liabilities. Positive direct correlation. f) When one account is current and another a non-current it results in flow of funds. 7. The worthiness of an organisation’s working capital is subject to the industry in which it engages, its link with its suppliers and customers. In this method, working […] Net Profit Ratio Signifies:(a) Operational Profitability, (b) Liquidity Position,(c) Big-term Solvency,(d)Profit for Lenders. Gross working capital refers to the total current asset quantum possessed by a company at any given point in an accounting year. 7. It is also called “Sales Profit”. Trading organization requires less working capital. Working capital is essentially the capital that is required for a business to run on a regular basis. What is Net working capital ? The methods are: 1. Operating Cycle/Turnover of Working Capital : Turnover means speed with which the working capital is converted into cash by sale of goods. Difference between gross profit and operating profit can be understood from their point of origin, deductions (if any), etc. It makes up all those assets which can be readily converted into cash within an accounting period. Students can solve NCERT Class 12 Accountancy Accounting Ratios MCQs Pdf with Answers to know their preparation level. Multiple Choice Questions: 1. Gross Working Capital Gross working capital is the total amount of a company's current assets. g) Any transaction that increases working capital is an application of fund. Under inflationary conditions the same level of inventory will require _____ investment in working capital. 2. The ratio is an indicator of the short term liquidity and financial strength of the business and indicates it’s ability to finance short term obligations. Ans. A letter of credit is issued by a bank an the behalf of its customers. 4. working capital is known as the circulating capital as it circulates in the business just like blood in the human body.” 1. Businesses use the calculation of gross working capital to measure cash flow. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. Gross Working Capital is equal to Current Assets and Net Working Capital is equal to Current Assets less Current Liabilities. Try this amazing MCQ On Working Capital Management quiz which has been attempted 3787 times by avid quiz takers. Percentage of Sales Method 2. 62. Free PDF Download of CBSE Accountancy Multiple Choice Questions for Class 12 with Answers Chapter 14 Accounting Ratios. 9. Having a cash reserve 4. The working capital over total assets ratio, sometimes referred to as the net working capital ratio, measures the net liquid assets of a business as a percentage of it’s total assets. 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