FNC3213 Working Capital Management

Working capital management focuses on the current assets and long term liabilities that determine the liquidity.

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The goal of working capital management is to ensure adequate cash flow for operations.

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To financial analysts, “Working Capital” means the same as:

• Current Assets – Total Liabilities

• Total Assets – Current Liabilities

• Total Assets – Total Liabilities

• Current Assets – Current Liabilities

What are the aspects of Working Capital Management?

• Receivable management

• Inventory management

• Cash management

• All of the above

Which of the following is NOT true of working capital?

• It is the amount of capital the firm has available to pay for its operations

• The amount of money a firm has to spend in the short term

• It is a measure of the firm's liquidity

• It is the sum total of a firm's fixed assets

What does a negative working capital indicate?

• Financial distress

• Efficient operations

• Strong profitability

• Excessive liquidity

Why is working capital crucial for businesses?

• It represents long-term investments in the company.

• It ensures high profitability at all times.

• It covers day-to-day operational expenses.

• It solely pertains to shareholders' equity.

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

• Building

• Account Receivables

• Inventory

• Cash

The cash conversion cycle (CCC) is defined as ________.

• Average Age of Inventory + Average collection period - Average Payable Period

• Average Age of Inventory - Average collection Period - Average Payable Period

• Average Age of Inventory + Average collection period + Average Payable Period

• Average Age of Inventory - Average collection period + Average Payable Period

Which of the following would decrease a firm's cash conversion cycle?

• Increase the inventory days.

• Increase the accounts receivable day

• Increase the accounts payable days.

• Increase the cash days