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WorksheetsTreasury Management-Midterm Exam (BSBA4)
Total questions: 35
Worksheet time: 58mins
What is the primary objective of working capital management?
Maximizing long-term profitability
Minimizing short-term liquidity
Minimizing long-term profitability
Maximizing short-term liquidity
Which of the following is not considered a component of working capital?
Accounts Receivable
Accounts Payable
Fixed Assets
Inventory
An increase in which of the following will decrease a company's working capital?
Accounts Receivable
Inventory
Accounts Payable
Cash
If a company holds too much inventory, what is the likely impact on working capital?
Working capital increases
Working capital decreases
There is no impact on working capital
It depends on other factors
In a just-in-time (JIT) inventory system, what is the primary objective with respect to working capital management?
Maximize inventory levels to meet all customer demands
Minimize inventory levels to reduce carrying costs
Extend the credit period for customers
Offer discounts to customers for early payments
Which financial metric helps determine the efficiency of inventory management in relation to working capital?
Current Ratio
Acid-Test Ratio
Inventory Turnover Ratio
Debt Ratio
A company decides to extend its accounts payable period. How will this impact its working capital?
Increase working capital
Decrease working capital
No impact on working capital
It depends on other factors
A company is experiencing a cash flow shortage and wants to improve its working capital quickly. Which action should it consider?
Increase accounts receivable
Reduce inventory levels
Delay payments to suppliers
Offer discounts to customers for early payments
What is the primary disadvantage of extending credit terms to customers in working capital management?
Reduced accounts receivable turnover
Improved cash flow
Increased customer satisfaction
Reduced profitability
What is the primary purpose of managing accounts receivable effectively in working capital management?
To minimize the time it takes to convert cash into inventory
To optimize the time it takes to convert accounts payable into cash
To maximize the time a company has to pay its suppliers
To minimize the time it takes to convert accounts receivable into cash
The primary components of working capital include cash, accounts receivable, inventory, and accounts payable.
True
False
Unusually high proportions of any one component of working capital, such as inventory or receivables, are typically indicative of proper management practices.
True
False
The credit granting decision should be based on a comprehensive evaluation of the customer's creditworthiness and the potential impact on the company's financial health
True
False
A company's approach to extending credit to its customers with a higher degree of flexibility and less stringent requirements which typically applies to companies with high product margins and has an intent on gaining market share
Tight credit policy
Loose credit policy
Receivable financing
Credit granting
Which of the following is a credit control used by Treasury to reduce the probability of default by customers?
Issue credit based on credit scoring
Alter payment terms
Offer financing by a third party
All of the choices
Guarantee can be
Personal guarantee by an owner
Guarantee by corporate parent
Letter of credit by a bank
any of the choices
A guarantee by a third party against nonpayment by a customer.
Letter of credit
Credit insurance
Collateral
Credit Authorization
Which of the following is a credit control used by Treasury to reduce the probability of default by customers?
Issue credit based on credit scoring
Alter payment terms
Offer financing by a third party
all of the choices
Which factor will probably extend customer payment due to inaccurate invoices?
Invoicing delay
Invoicing errors
Mailing delay
Customer bankruptcy
To avoid mailing delay of invoices, the accounting can
Issue invoices by email or electronic data interchange
Deliver directly the invoice to customers
Send multiple copies of invoices
The situation is beyond human control
Which collection technique can be used for managing receivables?
Dunning letters
On-site visits
Attorney letters
any of the choices
Statement I. Inventory is the least liquid current asset
Statement II. A better practice in inventory management is to reject all inbound deliveries that do not have a purchase order authorization
Statement I is False
Statement I is True and statement II is False
Both statements are True
Both statements are False
Which statement best describes 'safety stock'?
Safety stock is the inventory held to meet unexpected increases in customer demand especially during ordering time
Safety stock refers to the excess inventory maintained to optimize manufacturing efficiency.
Safety stock is the inventory reserved for promotional sales and discounts
Safety stock is the inventory held for quality control purposes
What is the primary purpose of calculating lead time in supply chain management, and how does it impact inventory management strategies?
To determine the time it takes to produce a product
To assess the efficiency of the sales team
To evaluate the time it takes for a supplier to deliver goods
To calculate the time it takes for inventory to expire
Under this system, a company receives an order from a customer and contacts its supplier with the shipping information, who in turn ships the product directly to the customer.
Inventory control
Shifting supplier
Drop shipping
Reseller system
This policy/system result in extremely high levels of inventory and yield lower - quality goods since employees favor higher volume over higher quality
Quota system
volume - based incentive pay systems
bonus system
sales commission
In which situation does the acquisition of smaller, simpler machines having lower maintenance costs applicable?
When using high-capacity machinery requires immense production volumes which results to accumulation of too much inventory
When a machine requires a substantial amount of time to be switched over to a new configuration for the production of a different part
Where tend to be large batches of work - in - process inventory piling up behind each machine because this approach calls for the completion of a job at one workstation before the entire job is moved to the next workstation
none of the choices
Which figure demonstrates cellular manufacturing?
Encircle the letter.
It is the record of the materials used to construct a product.
Delivery receipt
Job order ticket
Job order ticket
Bill of materials
Which of the following may result to too much inventory?
A company may feel that its primary method of competition is to provide excellent customer service, which requires it to never have a stockout condition for any inventory item
If there are a multitude of options, then a company may find it necessary to stock every variation on the product, which calls for a substantial inventory investment
Not being able to draw down all remaining inventory stocks under the old bill of materials before implementing the new change order.
All of the choices may result in over stocking
Calculate the working capital of Dream Company: Show Solution(2POINTS)
Cash: 110,487
Accounts Receivable: 125,145
Inventory: 82,487
Supplies: 12,541
Trade Payables: 142,600
Tax due: 7,500
Fleur De Liz Flower Shop sells floral arrangements for corporate events and accepts credit. The shop totaled P100,000 in gross sales for the year. Starting accounts receivables for the year were P10,000. Ending accounts receivables for the year were P15,000. Calculate the Average Receivable Collection Period. Identify whether the period is reasonable suppose the company's policy is to collect within a month after sale. (3POINTS)
The following information pertains to Parola Company in 2022:
Inventory at Dec.31 P16,000
Purchase of Direct Materials 72,000
Cost of Goods Sold 80,000
Raw Materials Inventory 12,000
ANSWER THE FOLLOWING: (2POINTS EACH)
The company’s inventory turnover was _________?
How many days is the inventory on hand?_______
What is the turnover level of raw materials when compared to just direct materials expenses? _______
Liquid Company reported annual purchases on credit of P123,000. Accounts payable at the beginning and end of the year were P12,000 and $25,100, respectively. The company wants to measure how many days it takes to pay its creditors (Accounts Payable Days). 3POINTS
The balance sheet and income statement of Noodles & Company, a fast-casual restaurant chain, shows the following information for fiscal years 2021 and 2022. To help the management decide on its new policy on working capital, you, as the Treasurer, are asked to analyze the information provided.
Requirements:
1. Working Capital for 2021 and 2022
2. Sales per day for 2021 and 2022
3. Days of Working Capital for 2021 and 2022
*NOTE: use 365 days to calculate sales per day.
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