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WorksheetsWorking Capital Management MCQs
Total questions: 20
Worksheet time: 10mins
Working capital is defined as:
Total assets of a firm
Current assets minus current liabilities
Long-term investments
Total equity of the firm
The primary objective of working capital management is to:
Maximize profits only
Ensure liquidity while maximizing profitability
Minimize tax liability
Minimize long-term debt
Which of the following is considered a current asset?
Plant and machinery
Cash and marketable securities
Land
Buildings
Which of the following is considered a current liability?
Long-term loan
Accounts payable
Equity shares
Retained earnings
Cash management in working capital involves:
Ensuring sufficient cash for operations
Investing in fixed assets
Issuing long-term debt
Paying dividends only
Inventory management aims to:
Maximize cash holdings
Maintain optimum inventory levels to prevent stockouts and overstocking
Minimize shareholder wealth
Increase long-term debt
Accounts receivable management focuses on:
Reducing sales
Collecting payments from customers efficiently
Paying suppliers on time
Issuing equity shares
Which of the following is a short-term financing source for working capital?
Equity shares
Bank overdraft
Term loan
Debentures
The working capital cycle represents:
The time taken to convert raw materials into cash
The depreciation of fixed assets
The long-term financing cycle
Dividend payout policy
Net working capital (NWC) is:
Total assets minus total liabilities
Current assets minus current liabilities
Fixed assets minus long-term debt
Total equity minus retained earnings
An aggressive working capital policy involves:
Maintaining high current assets
Minimizing current assets to increase profitability
Keeping only cash reserves
Avoiding all short-term financing
A conservative working capital policy involves:
Minimizing current assets
Maintaining high levels of current assets to ensure liquidity
Ignoring cash requirements
Relying solely on long-term debt
The cash conversion cycle measures:
The time between paying suppliers and collecting from customers
The long-term investment period
The debt repayment period
Total assets turnover
Which of the following can improve working capital efficiency?
Faster collection of receivables
Slower payment to suppliers
Reducing inventory turnover
Both A and B
Which of the following is a current asset management decision?
Issuing equity shares
Maintaining optimum levels of cash, receivables, and inventory
Choosing long-term debt financing
Deciding dividend policy
The primary risk in aggressive working capital management is:
Lower profitability
Illiquidity and inability to meet short-term obligations
Excess cash
Over-investment in long-term assets
Trade credit is:
A long-term source of finance
A short-term source of finance from suppliers
A type of equity
A method of issuing debentures
The objective of receivables policy is to:
Minimize collection period and maximize sales
Maximize inventory
Delay payments to suppliers indefinitely
Reduce fixed assets
An optimal working capital ensures:
High liquidity without excessive idle resources
Maximum short-term debt
Maximum long-term investments
Ignoring cash requirements
Working capital management involves decisions related to:
Cash, inventory, receivables, and payables
Long-term financing only
Dividend policy only
Equity valuation
