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      Question

      Which of the following is a key assumption in the

      Simplified Turnover Method for assessing working capital?
      A The working capital requirement is based on current liabilities. Correct Answer Incorrect Answer
      B The working capital gap is calculated using a rolling average of sales over 5 years Correct Answer Incorrect Answer
      C There are 4 operating cycles in a year Correct Answer Incorrect Answer
      D The margin is determined solely by the net working capital of the firm. Correct Answer Incorrect Answer
      E The method uses a fixed rate of 30% of turnover for working capital assessment. Correct Answer Incorrect Answer

      Solution

      ┬а In the Simplified Turnover Method, it is assumed that there are 4 operating cycles in a year, and the working capital requirement is calculated based on 25% of the projected turnover. This helps estimate the funds needed to support day-to-day operations.

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