WORKING CAPITAL MANAGEMENT

What is working capital?

• Fixed assets

• Current assets - Current liabilities
  

• Total assets

• Long-term debt

Which of the following is not a component of current assets?

• Inventory

• Accounts Receivable

• Land and Buildings

• Cash

A company's working capital is negative. What does this indicate?

• The company is in financial trouble

• The company is very profitable

• The company has a strong liquidity position

• The company's assets are undervalued

What is the primary goal of working capital management?

• Maximizing long-term profitability

• Minimizing current assets

• Minimizing current liabilities

• Ensuring liquidity and solvency

Which ratio measures the efficiency of a firm's working capital management?

• Net Profit Margin

• Debt to Equity Ratio

• Return on Assets (ROA)

• Inventory Turnover Ratio

A company with a high current ratio is likely to have:

• Excessive liquidity

• Insufficient liquidity

• High profitability

• Low profitability

Which of the following is not a source of short-term financing?

• Bank loans

• Trade credit

• Long-term bonds

• Commercial paper

The policy of maintaining a higher level of current assets to meet unexpected fluctuations in demand or supply is known as:

• Aggressive working capital policy

• Conservative working capital policy

• Moderate working capital policy

• Neutral working capital policy

What is the formula for the Quick Ratio (Acid-Test Ratio)?

• (Current Assets - Current Liabilities) / Total Liabilities

• (Current Assets - Inventory) / Current Liabilities

• Current Assets / Current Liabilities

• (Total Assets - Total Liabilities) / Total Assets

Which of the following is not a factor that affects a company's working capital needs?

• Seasonality of sales

• Supplier credit terms

• Economic conditions

• Management's salary