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WorksheetsF9 QUIZ 2 Working capital management
Total questions: 10
Worksheet time: 10mins
Which of the following ratios would most likely be used by management to evaluate short-term liquidity?
A. Return on total assets
B. Financial gearing
C. Accounts receivable turnover
D. Acid test (quick) ratio
Which of the following is NOT included in the calculation of the operating cycle?
A. Inventory holding period
B. Payables payment period
C. Receivables collection period
D. Settlement discount period
Stewart Co uses the Economic Order Quantity (EOQ) model for inventory management.
A decrease in which of the following variables would increase the EOQ?
A. Cost per order
B. Level of buffer inventory
C. Holding cost
D. Quantity demanded
Lyle Co’s inventory reorder level is 500 units, the lead time is three weeks, and the sales volume is estimated at 50 units per week.
What quantity of safety (buffer) inventory should Lyle hold?
A.150
B.350
C.500
D.650
Which of the following is NOT a feature of a just-in-time system?
A. No holding of buffer stock
B. Long production runs
C. Geographical proximity to suppliers
D. High quality raw materials inventory
Which TWO of the following would increase the net working capital of a company?
A. Collection of accounts receivable
B. Refinancing of accounts payable with a two-year bank loan
C. Using the proceeds of a rights issue to repay an overdraft
D. Payment of a dividend
During the year, Mason Co’s current assets increased by $120,000 and current liabilities decreased by $50,000.
What was the effect on net working capital?
A. Increased by $170,000
B. Increased by $70,000
C. Decreased by $70,000
D.Decreased by $170,000
Which of the following may indicate overtrading?
A. Significant new issues of long-term finance
B. Rising profits but falling margins
C. Rising receivables turnover
D. Falling revenues
Which TWO of the following statements about overcapitalisation and overtrading are correct?
A. Overtrading often arises from a rapid increase in sales
B. Overcapitalisation results in a relatively low current ratio
C. Overtrading may result in a relatively high accounts payable turnover period
D. Overcapitalisation is the result of too much short-term capital
