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# 1

The management of popular Traders anticipates Rs. 15 Lakh in cash outlays (demands
during the next year. The recent experience has been that it costs Rs. 30 to convert
marketable securities to cash and vice versa. The Marketable security currently earns 8
percent annual return. What is the optimal economic quantity of cash transfer of
marketable securities according to Bonmolmodel. Also calculate number of conversions.
The Economic Order Quantity of Cash =

Q= [(2*annual cash required*cost of ordering cash)/Net interest cost of holding cash]1/2

EOQ = ((2)(15000000)(30)/0.08)1/2 = (1125000000) 1/2 = 33541.019
Number of conversion= Demand in cash ÷ EOQ
Number of conversion= 1500000 ÷ 33541.019 = 45
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Explain what are the working capital ratios? Explain them with example and interpret
Working capital
In which includes accounts receivable, accounts payable, cash and inventory, etc. it is a
measure of a company's efficiency, liquidity, and overall health.It is aquantity of money that
a business accessible to run its day-to-day activities.
Net working capital = Current Assets – Current Liabilities

Working capital ratio
Three types of working capital ratios:
1. Working capital turnover ratio
We use working capital ratio to recognise the relationship between the money that is used
to fund operations and the sales generated by these operations. If working capital ratio is
higher that is better for company it shows company generating more sale than money
uses to fund sale.

If a company has current assets of \$15 million and current liabilities of \$14 million. Formula .calculate its current ratio? Current ratio = 2000/1000= 2:1 It shows how much of the total current assets are financed through current liabilities A measure 2:1 means that current liabilities can be paid twice over out of existing current assets. 3. its working capital is \$1 million. Its sale has 18 million.Example. we calculate working capital turnover ratio Working capital turnover ratio = Sales / Net working capital \$18M/\$1M= 18M 2. Quick ratio Measures a how well a company’s ability to meet its short-term obligations by liquid assets. Current ratio Current ratio = Current Assets / Current Liabilities Example XYZ Company has current assets 2000 and current liabilities 1000.

.Quick ratio = Current Assets – Stock / Current Liabilities Example XYZ Company has current assets 2000 and current liabilities 1000 and its stock 1000.calculate its Quick ratio? Quick ratio = 2000-1000/1000= 1:1 A measure of 1:1 means that the company is able to meet existing liabilities.