Professional Documents
Culture Documents
Written Test
Section A:
1. You are the owner of a supplements company that specializes in organic vitamins. Your cost of
goods sold is $5,000. Currently, you have $20,000 in inventory in stock. What is your days sales
in inventory ratio value?
Ans: Inventory turn-over = COGS/Inventory
= 5000/20000
= 0.25
Considering, number of days= 365
Days Sales in Inventory ratio= 365*0.25= 91.25 Days
2. A new startup is looking to obtain a loan to expand business operations, and first must calculate
its debt-to-equity ratio. The total liabilities are $50,000 and the total equity is $20,000,
producing a debt-to-equity ratio of 2.5. How is this ratio interpreted?
Ans: Given the amount of debt is 2.5 times the equity, shareholders are showing less trust in the
firm. As shareholders are having less trust in the company, debt was taken to finance the operations
and to meet other expanses.
Though, Debt is less costly as it provides tax rebates, higher the amount of debt will make it
difficult for the firm to service the debt and pay the interest. As debt ration increases leverage
comes in which is not much desirable.
3. Gross Profit Ratio is calculated by
Ans: Gross Profit Ratio= Gross Profit/ Sales
=525000/ (110000+100000)/2
=5
=830000/ (830000/365)
=365
= 105000/ (830000/365)
= 46.17 Days
The estimated cost of inventory to be shown on the retailer's January 31, 2017 balance
sheet is.
Section B
11. As a finance manager, what data would you give your management in the weekly meetings.
12. Your warehouse team handles stock in and out. As a retailer, 5% of your sales are returned goods.
Please walk through the method you adopt for inventory reconciliation
Ans: As 5% of the sales is returned goods, we need to identify and make provision beforehand for
such changes. We need to consider gross sales and net sales as a different entity. We should do
calculation of future projection based on considering such changes.
13. We hold an inventory of 250 pieces of a product and the product is remaining unsold since the
last 6 months. The management’s policy is not to hold inventory of more than 3 months. If the
cost price, tax and cost of selling are the same as in the previous example, what would you advice
the management as the optimal selling price. (The landed cost of a product is Rs. 10,000/-. The
product carries a GST rate of 18%, The cost of selling the same is 12%.)
Ans: As stock is lying for more than 3 months, according to policy, it might not give any value to the
firm. If we can recover at least landed cost of the product that would be desirable.
=Rs. 9491.52/-
14. Your MD is seeking your advice on buying or hiring a multipurpose printer. What will be your
assessment and what will you advise him?
Ans: we need to see what is the current usage of printer which will give us the demand for the new
printer. As it is multipurpose printer, it would be able to satisfy more needs of printing than the simple
one. By looking at the utility of such printer, we can find the ho much cost it will be able to save. We
also need to look at the time it consumes in printing. Looking at the cost it can save for the firm, over
its useful period and the price it will incur, we can decide to buy it or not.
15. We are borrowing funds at 12% p.a. A new brand is demanding either advance payment with 2%
cash discount or 30 days credit with Bank guarantee of an amount equal to the cost of goods
purchased. Bank is insisting on a cash margin of 15% for issuance of a bank guarantee and the
commission they charge is 3% p.a. What would you advice the management?
16. What is GST and for an e-retailer in what way do you think it would impact the profits
Ans: GST is newer form of indirect taxes. It will be levied on the user based on the value of the product.
The main thing to notice is that it will reduce the cascading of the taxes. In the older pattern, tax was
levied on the amount of the tax already paid which was increasing the price of the goods. Once GST
is applied such cascading could be stopped.
GST will be mainly divided into 3 types: SGST-State GST, CGST- Central GST, IGST- Integrated GST
Foe e-retailer, it will impact when goods will be transferred from one state (source) to other state
(destination). It is destination based tax, so it will be levied where goods are consumed. As it will
reduce the extra tax and transportation will be quicker and smoother will help e-retailer to serve the
customer across the state easily.
17. How would you manage day to day operations in the finance department covering each area
separately?
Ans: To manage the day to day operations in the finance department, usage of IT will very crucial.
Reporting structure can be transferred to ERP which will improve the efficiency and make it faster at
lower cost. Also, time consumed in such tasks will also reduce. Reporting can be done based on pre-
decided matrices which can be automated in ERP or any other platform.
18. How do you determine profitability if you were asked to analyse and report on a weekly basis?
19. What would be your plan of action if you were given the task to infuse funds to achieve 5X growth
by the next financial year?
20. What are the key areas in Operations would you focus on automation?
Ans: Automation can be done on the tasks which are not adding or adding less value to the overall
supply chain. Where human intervention required is very low like painting or washing, automation
can be done.
***Best of Luck***