MMPF 001 Solved Assignment 2023-24
Working Capital Management
MMPF 001 Solved
Assignment 2023-24 : All assignments are in PDF format which would be send
on email/WhatsApp (9958676204) just after payment.
Assignment Code: ASST/ MMPF 001/2023-24
Marks: 100
Attempt all the questions.
Q1. What do you
understand by Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)? How
does a change in these ratios affect the availability of bank credit to
business organisations? Discuss.
Cash Reserve
Ratio (CRR) and Statutory Liquidity Ratio (SLR) are monetary policy tools used
by central banks to regulate the liquidity in the financial system and control
the money supply. Both these ratios are implemented to ensure the stability of
the banking system and manage inflation.
Cash Reserve
Ratio (CRR):
CRR is the
percentage of a bank's total deposits that it is required to hold with the
central bank (like the Reserve Bank of India in the case of India) in the form
of cash reserves.
It is a
non-interest-bearing reserve that banks are mandated to maintain to ensure
their solvency and to control excess liquidity in the banking system.
If the central
bank increases the CRR, it reduces the amount of money that banks have
available for lending, thereby reducing the overall money supply in the
economy.
Statutory
Liquidity Ratio (SLR):
SLR is the
percentage of a bank's total deposits that it is required to invest in
specified liquid assets such as government securities.
Similar to CRR,
SLR is a prudential measure to ensure the liquidity and solvency of banks and
to control the money supply in the economy.
An increase in
SLR reduces the funds available for lending by banks, as a higher portion of
their deposits is tied up in government securities.
Impact on
Availability of Bank Credit to Business Organizations:
Increase in
CRR:
When the
central bank raises the CRR, banks are required to hold a higher proportion of
their deposits in reserve, leaving them with less money to lend.
The reduced
lending capacity may lead to higher interest rates on loans, making borrowing
more expensive for businesses.
This can result
in a slowdown in business investment and expansion due to the higher cost of
capital.
Increase in
SLR:
An increase in
SLR has a similar effect on banks. It forces them to invest a larger portion of
their funds in government securities or other approved assets, limiting the
funds available for lending.
Like an
increase in CRR, a higher SLR can lead to an increase in interest rates, making
loans more expensive for businesses.
The reduced
availability of credit can negatively impact the growth and investment plans of
businesses.
In summary,
changes in CRR and SLR directly affect the liquidity position of banks,
influencing their ability to lend. An increase in these ratios restricts the
funds available for lending, leading to higher interest rates and potentially
hampering the availability of credit to business organizations. Conversely, a
decrease in these ratios has the opposite effect, potentially stimulating
credit availability and economic growth. Central banks use these tools
strategically to manage inflation, control liquidity, and ensure the stability
of the financial system.
Q2. Discuss any two
Sources of Short-term Finance, other than Bank Credit and Trade Credit, that
are used by firms to meet their Working Capital needs.
Q3. Try to find out
from any Small and Medium Enterprises (SMEs) how they manage their working
capital effectively. Write a detail report on your findings.
Q4. Study the case on
“Receivables Management In Tata Consultancy Services Limited”, given in unit 15
of this course. Answer the Questions given at the end of this case.
MMPF 001 Solved
Assignment 2023-24 : All assignments are in PDF format which would be send
on email/WhatsApp (9958676204) just after payment.
MMPF 001 Solved
Assignment 2023-24, MMPF 001 Solved Assignment 2023-24, MMPF 001 Solved Assignment
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