This quiz works best with JavaScript enabled. Home > Corporate Finance > Working Capital Management – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 1 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which ratio measures the efficiency of a firm's working capital management? A) Net Profit Margin. B) Debt to Equity Ratio. C) Return on Assets (ROA). D) Inventory Turnover Ratio. Show Answer Correct Answer: D) Inventory Turnover Ratio. 2. Anyone who has bought from a business without payment (buying on credit) is known as a ..... A) Debtor. B) Creditor. Show Answer Correct Answer: A) Debtor. 3. Which of the following cost is estimated by multiply the quality determined in the bill of materials to the cost of each component? A) Operating. B) Production. C) Labour. D) Material. Show Answer Correct Answer: D) Material. 4. What is working capital? A) Fixed assets. B) Current assets-Current liabilities. C) Total assets. D) Long-term debt. Show Answer Correct Answer: B) Current assets-Current liabilities. 5. A conservative funding strategy uses all funding with long term debt or equity. The statement: A) Correct. B) Salah. Show Answer Correct Answer: A) Correct. 6. Use of safety stock by a firm would A) Increase inventory cost. B) Decrease inventory cost. C) No effect on cost. D) Both a and b. Show Answer Correct Answer: A) Increase inventory cost. 7. Which of the following is not a source of formal short term finance? A) Bank over draft. B) Commercial bill. C) Factoring. D) Trade credit. Show Answer Correct Answer: D) Trade credit. 8. Net working capital consisted with A) Current Assets minus Current Liability. B) Total assets minus Total Liability. C) Fixed assets minus Current Liability. D) Current Liability minus current Assets. Show Answer Correct Answer: A) Current Assets minus Current Liability. 9. The following are the motivations for a company to hold a certain amount of cash, EXCEPT A) Transaction Motive. B) Speculation Motive. C) Motif Berhati-hati. D) Compensation balance motive. Show Answer Correct Answer: C) Motif Berhati-hati. 10. Collection float is the amount of time it takes for a firm to be able to use funds after a customer has paid for its goods. A) True. B) False. Show Answer Correct Answer: A) True. 11. The longer the average payment period, the shorter the cash conversion cycle. A) True. B) False. Show Answer Correct Answer: A) True. 12. Which among the following models is used to calculate the timing of inventory order A) EOQ MODEL. B) Fixed order quantity order. C) Reorder point model. D) Fixed order inventory control. Show Answer Correct Answer: C) Reorder point model. 13. Ali's which is generally not cancellable and covers full economic life of the asset is known as A) Sale and leaseback. B) Operating lease. C) Financial lease. D) Economic lease. Show Answer Correct Answer: C) Financial lease. 14. Which of the following factors affects the working capital requirements of a business unit? A) Nature of business. B) Credit policy. C) Production policy. D) All of above. Show Answer Correct Answer: D) All of above. 15. Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy? A) The firm uses long-term financing to finance all fixed and current assets. B) The firm will see an increase in its expected profits. C) The firm will see an increase in its risk profile. D) The firm will increase its dividends per share (DPS) this period. E) Not aware of. Show Answer Correct Answer: A) The firm uses long-term financing to finance all fixed and current assets. 16. Maximum period for which a commercial paper can be issued is ..... A) 3 months. B) 6 months. C) 1 year. D) 2 ys. Show Answer Correct Answer: C) 1 year. 17. Cost of not carrying enough inventory include A) Lost sales. B) Customer disappointment. C) Possible workers layoffs. D) All of the above. Show Answer Correct Answer: A) Lost sales. 18. Which strategy aligns with a moderate working capital policy? A) Maintaining low levels of inventory and accounts receivable. B) Striving for a balanced approach between profitability and risk. C) Aggressively extending credit terms to customers. D) Utilizing excess cash for long-term investments. Show Answer Correct Answer: B) Striving for a balanced approach between profitability and risk. 19. Inventory holding cost includes A) Material purchase cost. B) Penalty charge of default. C) Interest on loans. D) None of above. Show Answer Correct Answer: D) None of above. 20. The minimum stock level is calculated ..... A) ROL-(NORMAL CONSUMPTION *NORMAL DELIVERY TIME). B) ROL-(normal +(consumption*normal delivery time). C) (ROL+ normal consumption)* normal delivery time. D) ROL+ normal consumption/normal delivery time. Show Answer Correct Answer: A) ROL-(NORMAL CONSUMPTION *NORMAL DELIVERY TIME). Next →Related QuizzesWorking Capital Management Quiz 2Working Capital Management Quiz 3Working Capital Management Quiz 4Working Capital Management Quiz 5Working Capital Management Quiz 6Working Capital Management Quiz 7Working Capital Management Quiz 8Working Capital Management Quiz 9Working Capital Management Quiz 10Working Capital Management Quiz 11 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books