CMA Intermediate · Financial Management and Business Data Analytics · Introduction to Working Capital Management
A firm's CCC rises from 60 days to 75 days while its daily cost of operations stays at Rs. 20,000. Assuming no other change, what is the additional working capital needed?
The additional working capital needed is Rs. 3,00,000. The cash conversion cycle lengthens by 15 days, and each day of the cycle ties up Rs. 20,000 of operating cost, so the extra funding is 15 multiplied by 20,000.
- ARs. 3,00,000Correct
- BRs. 1,50,000
- CRs. 15,000
- DRs. 12,00,000
Explanation
Additional investment = increase in CCC x daily operating cost = 15 days x Rs. 20,000 = Rs. 3,00,000. Rs. 15,000 merely reports the day increase without multiplying by cost.
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