WORKING CAPITAL POLICY AND MANAGEMENT (2)

An increase in ________ would increase net working capital.

• A. plant and equipment

• B. accounts payable

• C. accounts receivable

• D. Both B and C

If current ratio is 2. Current liabilities are RM200,000. The current assets equal ________ and net working capital is ________.

• A. RM200,000 and RM400,000

• B. RM200,000 and RM100,000

• C. RM400,000 and RM200,000

• D. RM400,000 and RM400,000

Current assets include

• A. all assets that have not been fully depreciated.

• B. accounts payable, accounts receivable and short-term notes.

• C. cash, accounts receivable and leased equipment.

• D. cash, accounts receivable and inventory.

Which of the following would be considered an issue that is related to the management of working capital?

• A. How much inventory should the firm maintain?

• B. How should a firm finance its current assets?

• C. To whom should the firm grant trade credit?

• D. All of the above

An increase in ________ would decrease a firm's current ratio and net working capital.

• A. notes payable

• B. inventories

• C. cash

• D. both B and C

A decrease in ________ would increase net working capital.

• A. accounts payable

• B. accounts receivable

• C. cash

• D. marketable securities

In general, the greater a firm's rely on current liabilities to finance its assets, the lower the _______

• A. liquidity.

• B. flexibility.

• C. certainty of interest costs.

• D. both A and C.

The risk of a firm not being able to pay its bills on time is called ______

• A. illiquidity.

• B. insolvency.

• C. capital inadequacy.

• D. float.

Which of the following will reduce the liquidity of a firm? An increase in _____

• A. short-term notes payable.

• B. accounts payable.

• C. current assets.

• D. both A and B.

Net working capital refers to which of the following?

• A. Current assets

• B. Current assets minus current liabilities

• C. Current assets minus inventory

• D. Current assets divided by current liabilities