Chap 7

Is the following statement true and false?
“The key trade-off that lies at the heart of working capital management, is that between business stability and solvency”

• 
  True

• 
  False

Is the following statement true and false?
“Insurance cost is an inventory holding cost”

• True

• False

Is the following statement true and false?
“Profit and cash flows are the same.”

• True

• 
  False

Is the following statement true and false?
“When using the EOQ formula to find the optimal quality to be ordered, the purchase price per unit is included in the calculation”

• True

• False

Is the following statement true and false?
“Just in time (JIT) manufacturing systems require a large amount of inventory to be held for production and sales”

• 
  True

• False

Is the following statement true and false?
“Perpetual inventory method is a system whereby inventory levels are reviewed at fixed time intervals to fit in with production schedules, and variable quantities are ordered as appropriate.”

• 
  True

• False

Is the following statement true and false?
“In the re-order level system of inventory control, a fixed quantity will be ordered whenever inventory falls to a pre-determined level”

• 
  True

• False

Is the following statement true and false?
“In the ABC system of inventory control, inventory is categorized into classes A, B or C according to annual cost of the usage of that inventory item, or the difficulty of replacements, or the importance to the production process.”

• True

• False

Is the following statement true and false?
“In the periodic review system of inventory control, the inventory records are updated for each receipt and issue of inventory as it occurs.”

• True

• 
  False

Which of the following is the correct formula to calculate working capital?

• A. Inventory - Cash - Receivables + Payables

• B. Inventory + Cash + Receivables - Payables

• C. Receivables + Payables- Inventory - Cash

• D. Inventory + Cash + Payables - Receivables