This quiz works best with JavaScript enabled. Home > Corporate Finance > Working Capital Management – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 3 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Inventories can be classified into A) Product, material, item. B) Raw material, work in progress, and finished good. C) Stationaries, and other goods. D) None. Show Answer Correct Answer: B) Raw material, work in progress, and finished good. 2. The due date of a 60 days note receivable signed on April 17 is A) June 16. B) June 17. C) June 28. D) June 15. Show Answer Correct Answer: A) June 16. 3. The optimal level of working capital is achieved when: A) Current assets exceed current liabilities. B) Current assets equal current liabilities. C) Current assets are less than current liabilities. D) Current assets are unrelated to current liabilities. Show Answer Correct Answer: B) Current assets equal current liabilities. 4. Which of the following is not a benefit of carrying inventories A) Reduction in ordering cost. B) Avoiding lost sales. C) Reducing carrying cost. D) Avoiding Production Shortages. E) Not aware of. Show Answer Correct Answer: C) Reducing carrying cost. 5. Working Capital Management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelations that exist between them. A) True. B) False. Show Answer Correct Answer: A) True. 6. What characterizes current assets? A) Assets expected to be converted into cash within 3 years. B) Assets that remain in a company for more than 5 years. C) Assets expected to be converted into cash within a year. D) Assets used for long-term investments. Show Answer Correct Answer: C) Assets expected to be converted into cash within a year. 7. Equipment can be classified as ..... A) Permanent asset. B) Temporary asset. C) Permanent source. D) Temporary source. E) Spontaneous source. Show Answer Correct Answer: A) Permanent asset. 8. What are the aspects of Working Capital Management? A) Receivable management. B) Inventory management. C) Cash management. D) All of the above. Show Answer Correct Answer: D) All of the above. 9. Concept of maximum permissible Bank finance was introduced by A) Kahnna committee. B) Chore committee. C) Nayak committee. D) Tandon committee. Show Answer Correct Answer: D) Tandon committee. 10. Which of the following is not an instrument traded in the money market A) Commercial papers. B) Promissory notes. C) Certificates of deposits. D) Debentures. Show Answer Correct Answer: D) Debentures. 11. What is trade credit? A) The credit that a firm extends to its customers. B) The percentage discount offered to a customer who opts to pay their account early. C) The amount a firm is owed by its customers who have received goods and services but have not yet paid for them. D) The amount that a firm owes its suppliers for goods which it has received but for which it has not yet paid. Show Answer Correct Answer: A) The credit that a firm extends to its customers. 12. ..... function includes a firm's attempts to balance cash inflows andoutflows. A) Finance. B) Investment. C) Liquidity. D) Dividend. E) Not aware of. Show Answer Correct Answer: B) Investment. 13. Working capital alters a firm's value by affecting its free cash flow. A) True. B) False. Show Answer Correct Answer: A) True. 14. Durable Furniture Company uses about 200, 000 yards of a particular fabric each year. The fabric costs P25 per yard. The current policy is to order the fabric four times a year. Incremental ordering costs are about P200 per order, and incremental carrying costs are about P0.75 per yard, much of which represents the opportunity costs of the funds tied up in inventory. How much total costs are associated with the current inventory policy? A) P18, 750. B) For 19, 550. C) P38, 300. D) P62, 500. Show Answer Correct Answer: B) For 19, 550. 15. What factor(s) typically influence the working capital requirements of a business? A) Seasonality, operating cycle, and sales growth. B) Long-term investments and equity financing. C) Shareholder dividends and corporate tax rates. D) Employee training programs and office infrastructure. Show Answer Correct Answer: A) Seasonality, operating cycle, and sales growth. 16. The Camp Company has an inventory conversion period of 60 days, a receivable conversion period of 30 days and a payable turnover of 45 days. The Camp's variable cost ratio is 60% and annual fixed costs of P600, 000. The current cost of capital for Camp is 12%.If Camp's annual sales are P3, 375, 000 and all sales are on credit, what is the firm's carrying costs on accounts receivable, using 360 days year? A) P281, 250. B) For 168, 750. C) In line, 250. D) P20, 250. Show Answer Correct Answer: D) P20, 250. 17. A computer plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and reduce the ratio of credit sales to total revenue from 70% to 60%. The company estimates that projected sales would be 5% less if the proposed new credit policy were implemented. The firm's short-term interest cost is 10%. Projected sales for the coming year are P50 million.Assume a 360-day year, calculate the peso impact on accounts receivable of this proposed change in credit policy? A) P3, 333, 334 decrease. B) P3, 819, 445 decrease. C) P6, 500, 000 decrease. D) P18, 749, 778 increase. Show Answer Correct Answer: A) P3, 333, 334 decrease. 18. Which of the following is not a part of credit policy A) Collection effots. B) Cash discount. C) Credit standard. D) Paying practice of debtors. Show Answer Correct Answer: D) Paying practice of debtors. 19. Reorder level is calculated by A) Maximum consumption*maximum delivery time. B) Minimum consumption*minimum delivery time. C) Normal consumption*normal delivery time. D) None of above. Show Answer Correct Answer: A) Maximum consumption*maximum delivery time. 20. Which is not the service of factors A) Administration of sales ledger. B) Advanced against credit sales. C) Assuming bad debt loss. D) None of above. Show Answer Correct Answer: D) None of above. ← PreviousNext →Related QuizzesWorking Capital Management Quiz 1Working Capital Management Quiz 2Working 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