#1
What is working capital?
The difference between current assets and current liabilities
ExplanationMeasure of a company's liquidity and operational efficiency.
#2
Which of the following is not a component of working capital?
Property, Plant, and Equipment
ExplanationAssets that are not readily convertible to cash.
#3
What is the primary goal of working capital management?
Maintaining liquidity while minimizing costs
ExplanationBalancing liquidity needs with cost efficiency.
#4
Which of the following is a source of short-term financing?
Accounts payable
ExplanationObligations to suppliers for goods or services.
#5
What does the Cash Conversion Cycle indicate about a company?
The efficiency of its inventory management
ExplanationEfficiency in converting inventory to cash.
#6
What does the term 'liquidity' refer to in financial management?
The ability of a firm to meet its short-term obligations
ExplanationIndication of financial health concerning short-term obligations.
#7
Which ratio measures a company's ability to pay off its short-term liabilities with its current assets?
Current Ratio
ExplanationIndicator of a company's liquidity and financial health.
#8
What is the cash conversion cycle?
The time it takes for a company to convert inventory into cash
ExplanationEfficiency metric indicating cash flow from operations.
#9
Which of the following is true about aggressive working capital management?
It aims to minimize the cash conversion cycle
ExplanationStrategy focused on reducing cash tied up in operations.
#10
What is the formula for the Operating Cycle?
Days Sales Outstanding + Days Accounts Receivable Outstanding
ExplanationIndicator of efficiency in managing receivables and payables.
#11
What is the formula for calculating the Quick Ratio?
(Cash + Marketable Securities + Accounts Receivable) / Current Liabilities
ExplanationMore stringent measure of a company's ability to meet short-term obligations.
#12
What is the formula for calculating the Cash Conversion Cycle?
(Days Inventory Outstanding + Days Sales Outstanding) - Days Payable Outstanding
ExplanationMeasurement of the efficiency of cash flow management.
#13
What is the purpose of the Cash Budget in working capital management?
To project cash inflows and outflows
ExplanationForecasting tool for managing cash flow.
#14
What is the primary goal of cash flow management in working capital?
To ensure sufficient liquidity
ExplanationMaintaining cash availability to meet obligations.
#15
What is the primary objective of managing working capital efficiently?
To ensure the company's survival and growth
ExplanationCritical for sustaining operations and expansion.