Liquidity of an organisation simply refers to the extent to which it has enough liquid funds and assets that are can be readily converted into cash to meet its operating expenses as well as liabilities as and when they fall due. Current assets are regarded as the liquid assets of an organisation.

You are required to state and briefly explain any five (5) Current Assets of a business enterprise. (25 marks)

Question 2

Eugen-Kay Construction Co. Ltd. expects credit sales of 24million in the next year and has budgeted production costs as follows:

million

Raw materials 4

Direct labour 5

Production overheads 3

Total production costs 12

Raw materials are in stock for an average of three weeks and finished goods are in stock for an average of four weeks. All raw materials are added at the start of the production cycle, which takes five weeks and incurs labour costs and production overheads at a constant rate. Suppliers of raw materials allow five weeks credit, whereas customers are given six weeks to pay. If production takes place evenly throughout the year, what is the total working capital requirement?

NB: Assume Work-in Progress is 50% complete at any point in time, 365 days a year and 52 weeks in a year.

You are required to compute the following for Eugen-Kay Construction Co. Ltd.:

i) Estimated Working Capital Requirement for the year; (18 marks)

ii) Cash Conversion Cycle. (7 Marks)

Question 3

Financial Management decisions may be broadly categorized into investment (capital budgeting), financing and dividend decisions.

You are required to explain each of the three (3) Financial Management decisions, giving appropriate examples. (25 marks)