FM CH-13 Working Capital

FM CH-13 Working Capital

1st Grade

16 Qs

quiz-placeholder

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FM CH-13 Working Capital

FM CH-13 Working Capital

Assessment

Quiz

Professional Development

1st Grade

Hard

Created by

PFC Education

Used 1+ times

FREE Resource

16 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

Thrifty CO's cash budget highlights a short-term surplus in the near future.

Which of the following actions would be appropriate to make use of the surplus?

Pay suppliers earlier to take advantage Of any prompt payment discounts

Buy back the company's shares

Increase payables by delaying payment to suppliers

Invest in a long term deposit bank account

2.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

Which of the following might be associated with a shortening working capital cycle?

Lower net operating cash flow

Increasing tax-allowable depreciation expenditure

Slower inventory turnover

Taking longer to pay suppliers

3.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

The cash cycle is equal to which Of the following?

Accounts receivable collection period plus inventory holding period minus accounts

payable payment period

Inventory holding period minus accounts receivable collection period minus accounts

payable payment

Accounts receivable collection period plus inventory holding period plus accounts

payable payment period

Accounts receivable collection period minus accounts payable payment period minus

inventory holding period

4.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

A company has annual credit sales of $27 million and related cost of sales of $15 million. The

company has the following targets for the next year:

Accounts receivable collection period 50 days

Inventory holding period 60 days

Accounts payable payment period 45 days

Assume there are 360 days in the year.

What is the net investment in working capital required for the next year?

$4,375,000

$2,875,000

$6,375,000

$8,125,000

5.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

Which TWO of the following would be key aspects of a company's accounts receivable

credit policy?

Assessing creditworthiness

Checking credit limits once a year

Invoicing promptly and collecting overdue debts

Delaying payments to obtain a 'free' source of finance

6.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

For a retailer, let

S = Sales

P = purchases

O = Opening inventory

C = Closing inventory

D = Opening receivables

R = Closing receivables

Which of the following is the best expression for the accounts receivable collection period

at the period end?

(D + R]/P x 365

(D + R]/S x 365

R/S x 365

D/S x 365

7.

MULTIPLE CHOICE QUESTION

30 sec • 2 pts

Which of the following is NOT usually associated with overtrading?

An increase in the current ratio

A rapid increase in revenue

A rapid increase in the volume of current assets

Most of the increase in current assets being financed by credit

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