course title : Corporate Finance/Corporate Finance and Accounting

QUESTION 6 A) - [8 marks] "Cash invested in working capital is idle, earning no return as does invest in fixed assets. It should therefore be regarded as a necessary evil but kept to an absolute minimum". Discuss. Page 6 of 7 QUESTION 6 (B) - [8 marks] In driving the profitability and liquidity position of an organization in the current global business environment, one area that has become the focus or centre of attention to Management is how working capital is managed. Aggressive, moderate, and conservative policies to working capital management have implications on the profitability and liquidity positions of the organization. REQUIRED: In the light of the above, explain and demonstrate the impact of each of the policies below on profitability and liquidity: i) Aggressive working capital management. ii) Moderate working capital management. iii) Conservative working capital management QUESTION 6 (C) - [4 marks] Holding stock and sometimes over-stocking come at a great cost to a company. Notwithstanding these costs, it is sometimes necessary to hold stock or over stock for the smooth running of the company REQUIRED: i) Explain THREE (3) reasons for holding stock. ii) State and explain THREE (3) costs associated with holding stocks