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Business Studies · 2022 · 5 marks
CBSE 2022 · Region 2 · Set 1 · Q12
(a) Sahil is the Finance Manager of ‘Knitwear Ltd’. The company is engaged in the manufacturing of woolen clothes. The demand of the company’s…
Sahil is the Finance Manager of ‘Knitwear Ltd’ . The
company is engaged in the manufacturing of woolen
clothes. The demand of the company’s products is seasonal
whereas the production continues throughout the year. Due
to the quality of its products, the company’s business is
spreading across the country. The company is operating at
a large scale having its regional offices in Northern,
Southern, Eastern and Western India. The performance of
its each division is of very high level. For uninterrupted
availability of raw materials, the company requires high
stock levels. Not only this, to face the competition and to
meet the urgent orders of the customers, the company also
needs enough stock of finished goods.
Considering the above discussion, state five factors
affecting working capital requirements of ‘Knitwear Ltd.’.
Abhishek Engineering Ltd. , a leading manufacturer of
steel rods wants to enter into the business of manufacturing
trucks. For this, the Finance Manager has to ensure the
availability of funds whenever required and its possible
sources. He has to see that the company does not raise
funds unnecessarily. In this way he has to match the funds
requirement and their availability.
(i)
Identify and give the meaning of the concept discussed in
the above para which will help the Finance Manager to
achieve his objectives.
(ii)
Also, state any three points of importance of the concept
identified in (i) above.
Marking-scheme solution
Factors affecting working capital requirements of
‘Knitwear Ltd.’:
(i)
Nature of business affects working capital requirement as
trading organisation requires smaller amounts of working
capital than manufacturing organisations as there is no
processing. Service industries require less working capital as
they do not have to maintain inventory.
(ii)
Scale of operations affects working capital requirement as
firms operating on a higher scale require more working capital
as their quantum of inventory and debtors is generally high.
(iii)
Seasonal factors affects working capital requirement as
peak season requires higher working capital than lean season
due to higher level of activity.
(iv)
Free and continuous availability of raw materials enables
the firms to keep lesser stock and hence work with smaller
working capital.
(v)
Level of competition affects working capital requirement as
higher competition requires larger stocks to meet urgent orders
from customers and thus higher working capital
OR
The concept discussed in the above para is Financial
Planning.
The process of estimating the fund requirements of a business
and specifying the sources of funds is called financial planning.
OR
Financial planning is the preparation of a financial blueprint of
an organisation’s future operations.
Importance of Financial planning:
(i)
It helps the company to prepare for the future.
(ii)
It helps in avoiding business shocks and surprises.
(iii)
It helps in co-ordinating various business functions.
$\displaystyle 15$ Q. (iv) It helps in reducing waste, duplication of efforts, gaps in
planning and confusion.
(v)
It links the present with the future.
(vi)
It provides a link between investment and financing
decisions.
(vii)
It makes evaluation of actual performance easier by
spelling out detailed objectives for various business segments.
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CBSE Class 12 Business Studies past-paper question from the 2022 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.