Working capital

What does this represent?

• Cash flow

• Business Activity

• Working capital cycle

• Liquidity cycle

The _________________ the amount of time between buying materials (inputs) to receiving payments from the customer the higher the risk to a firm.

• Longer

• Shorter

Sufficient working capital is needed to prevent a business from becoming insolvent.

• True

• False

Anyone who has bought from a business without payment (buying on credit) is known as a _____________.

• Debtor

• Creditor

Current liabilities are debts that have to be paid ________

• in the next 12 months

• in the next 5 years or more

• in order to buy a current asset

• to buy more working capital

The working capital situation of a firm can be improved by obtaining ______________ forms of _____________ term finance.

• external, short

• internal, long

Obtaining too much external finance to improve working capital can make the problem worse.

• True

• False

Another term for "stock" (in the context working capital)

• Shares of a company

• Inventory of finished or unfinished goods or unused raw materials

• Price sold on the stock market

Which of the following could be turned into cash the easiest or quickest?

• Raw materials

• Finished product sitting in a warehouse

• Unfinished products being manufactured

Net working capital is the difference between current assets and current liabilities.

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