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Business Studies · 2023 · 3 marks
CBSE 2023 · Region 4 · Set 1 · Q24
(a) State any three points that highlight the importance of financial planning.
(a)
State any three points that highlight the importance of financial
planning.
OR
(b)
State how the following factors affect the working capital
requirements of a company :
(i)
Seasonal Factors
(ii)
Production Cycle
(iii)
Operating Efficiency
Marking-scheme solution
Importance of financial planning:
(i)
It helps in forecasting what may happen in future under
different business situations. By doing so it helps the firms to
face the eventual situation in a better way.
(ii)
It helps in avoiding business shocks and surprises and
helps the company in preparing for the future.
(iii)
It helps in co-ordinating various business functions by
providing clear policies and procedures.
(iv)
Detailed plans prepared under financial planning reduce
waste, duplication of efforts and gaps in planning.
(v)
It tries to link the present with the future.
(vi)
It provides a link between investment and financing
decisions on a continuous basis.
(vii)
By spelling out detailed objectives for various business
segments, it makes the evaluation of actual performance
easier.
State how the following factors affect the working
capital requirements of a company:
(i)
Seasonal Factors
(iì) Production Cycle
(iii)
Operating Efficiency
(i)
Seasonal Factors
In peak season, because of higher level of activity larger
amount of working capital is required whereas the level of
activity as well as the requirement for working capital will be
lower during the lean season.
(ii)
Production Cycle
It is the time span between the receipt of raw material and
their conversion into finished goods. Duration and the length
of production cycle, affects the amount of funds required for
raw materials and expenses. Working capital requirement is
higher in firms with longer processing cycle and lower in
firms with shorter processing cycle.
(iii)
Operating Efficiency
Firms manage their operations with varied degrees of
efficiency. Better sales efforts may reduce the average time
for which finished goods inventory is held. Such efficiencies
may reduce the level of raw materials, finished goods and
debtors resulting in lower requirement of working capital.
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CBSE Class 12 Business Studies past-paper question from the 2023 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.