- 20 Marks
FM – L2 – Q117 – Working Capital Management
Identify three types of working capital policies for an organization.
Question
(A) A good working capital policy should facilitate successful achievement of the key short-term financing objectives of an organisation.
Required:
Identify the three types of working capital policies of an organisation.
(B) Sunyani Farms Ltd is preparing a business plan to apply for a grant from GDAIF for an expansion of its rice production. Current production is 20,000 bags at a variable cost per bag of GH₵12.00 and contribution sales ratio is 25%. Variable cost is for purchases. Current receivable days is 30 days and inventory turnover is 12 times. Suppliers allow 15 days credit and the company maintains absolute cash ratio of 1:1.
The funding support from GDAIF is expected to double the production capacity of the company. Inventory and absolute cash ratios would be maintained but receivables and payables days will increase to 45 days and 30 days respectively. GDAIF policy is to support only the extra working capital needs of applicants.
Required:
Determine the amount that should be applied from GDAIF.
(C) Kumasi Ventures Ltd has a dividend cover of 4 times and recorded the following earnings after tax.
| Year | Earnings (GH₵) |
|---|---|
| 20X4 | 100,000 |
| 20X5 | 120,000 |
| 20X6 | 180,000 |
| 20X7 | 220,000 |
| 20X8 | 300,000 |
Required:
Calculate the average dividend growth rate for Kumasi Ventures Ltd.
Find Related Questions by Tags, levels, etc.
- Tags: Dividend Growth, Earnings, Financial analysis, Payout Ratio
- Level: Level 2
- Topic: Dividend policy
