Corporate Finance

Corporate Finance

Assessment

Flashcard

Business

University

Practice Problem

Hard

Created by

Jolly Ramirez

FREE Resource

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20 questions

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1.

FLASHCARD QUESTION

Front

What is the purpose of managing working capital?

Back

To ensure businesses have sufficient liquidity to meet their short-term requirements, such as day-to-day operations.

2.

FLASHCARD QUESTION

Front

What can happen to a profitable company if it does not manage its working capital effectively?

Back

It may become insolvent if it does not have the cash to pay for its daily operations.

3.

FLASHCARD QUESTION

Front

How is working capital defined?

Back

It is the capital available for conducting day-to-day operations, usually the excess of current assets over current liabilities.

4.

FLASHCARD QUESTION

Front

What is the goal of working capital management?

Back

To ensure that a company's cash level is appropriate to meet the working capital requirements.

5.

FLASHCARD QUESTION

Front

What are the risks of low cash levels in a business?

Back

They run the risk of bankruptcy.

6.

FLASHCARD QUESTION

Front

What does a conservative working capital policy entail?

Back

Holding higher levels of cash to ensure the company's working capital requirements are funded.

7.

FLASHCARD QUESTION

Front

What is the Cash Conversion Cycle (CCC)?

Back

It is the time a company spends on inventory until it converts it back to cash.

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