MS 41 IGNOU MBA Assignments Jan-June 2015

1. Distinguish the different working capital financing strategies. Under the present capital and money market conditions which of these would you recommend to a consumer durable manufacturing firm. Explain with reasons & list out your assumption, if any.

2. You are required to recommend as to which of the policies given below should be adopted by a trader who wants to pursue a more liberal credit policy to improve sales. His current sales are Rs. 15 lacs per annum & average collection period is 30 days.

Credit Policy Increase in Collection Period Increase in Sales
P 15 days Rs. 60,000
Q 30 days Rs 90,000
R 45 days Rs 1,50,000
S 60 days Rs 1,80,000
T 90 days Rs 2,00,000

The selling price per unit is Rs. 5. Average cost per unit is Rs. 4 and variable cost per unit is Rs. 2.75 paise per unit. The required rate of return on additional investment is 20 percent. Assume 360 days a year and that there are no bad debts.

3. Assume that the following quantity discount schedule, for a particular bearing, is available to a retails store:

Order Size (units) Discount
0-49 0%
50-99 5%
100-199 10%
200 and above 12%

The cost of a single bearing with no discount is Rs. 30. The annual demand is 250 units. Ordering cost is Rs. 20 per order and annual inventory carrying cost is Rs. 4 per unit. Determine the optimal order quantity and the associated minimum total cost of inventory and purchasing costs if shortage is not allowed.

4. Assume that you are in import business. Does a bank need to be satisfied about your credit worthiness before extending non fund facilities to you. Discuss this issue with a Banker and explain fully.

5. “In simulating financial decision, the strategy that produces the best simulated result is not necessarily the optimal financing strategy”, do you agree with this statement? Why or why not?

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