This quiz works best with JavaScript enabled. Home > Corporate Finance > Working Capital Management – Quiz 7 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 7 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Cost of not carrying sufficient inventory is known as A) Carrying Cost. B) Total Cost. C) Holding Cost. D) Stock Out Cost. E) Not aware of. Show Answer Correct Answer: D) Stock Out Cost. 2. There is deterioration in the management of working capital of XYZ Ltd. What does it refer to? A) That the Capital Employed has reduced. B) That the Profitability has gone up,. C) That debtors collection period has increased. D) That Sales has decreased. E) Not aware of. Show Answer Correct Answer: C) That debtors collection period has increased. 3. Which of the following is not a concern of working Capital Management A) Maintaining liquidity. B) Maintaining the required rate of return on assets. C) Maintaining the dividend payout ratio. D) Managing the cost and risk of short term funding. Show Answer Correct Answer: C) Maintaining the dividend payout ratio. 4. What are the expected annual savings from a lock-box system that collects 20 checks per day averaging P10, 000 each and reduces mailing and processing time by 2.5 and 1.5 days, respectively, if the annual interest is 5 percent? A) Ba, 000. B) P20, 000. C) P40, 000. D) P44, 444. Show Answer Correct Answer: C) P40, 000. 5. The company's inability to fulfill short-term obligations and other obligations that must be fulfilled immediately is called: A) Risk Insolvency. B) Legal Insolvency. C) Accounting Insolvency. D) Techincal Insolvency. E) Capital Insolvency. Show Answer Correct Answer: D) Techincal Insolvency. 6. Poor liquidity and higher risk represent A) Conservative current assets policy. B) Aggressive Currents. C) Moderate current assets policy. D) None of the above. Show Answer Correct Answer: B) Aggressive Currents. 7. What does a conservative working capital policy prioritize? A) Holding minimal levels of liquid assets. B) Maximizing short-term borrowing for immediate investments. C) Minimizing the risk of financial distress or default. D) Pursuing aggressive expansion strategies. Show Answer Correct Answer: C) Minimizing the risk of financial distress or default. 8. Working capital components whose conversion rate is lower than 100% are: A) Cash. B) Valuable Letters. C) Receivables. D) Buildings and Machines. E) Goods stock. Show Answer Correct Answer: E) Goods stock. 9. ..... is a part of the total assets of the company. A) Current assets. B) Current liabilities. C) Working capital. D) None of above. Show Answer Correct Answer: C) Working capital. 10. Having defined working capital as current assets, it can be further classified according to ..... A) Financing method and time. B) Rate of return and financing method. C) Time and rate of return. D) Components and time. E) Not aware of. Show Answer Correct Answer: D) Components and time. 11. On the balance sheet of a company it is written that total current assets are 600, 000, and total current liabilities are 400, 000. So the amount of working capital according to the qualitative concept is equal to A) 200.000. B) 600.000. C) 1.000.000. D) 1.200.000. Show Answer Correct Answer: A) 200.000. 12. Cost of holding inventory are A) Carrying cost, ordering cost and cost of running short. B) Storage cost, paying cost, and labor cost. Show Answer Correct Answer: A) Carrying cost, ordering cost and cost of running short. 13. Which among the following costs is the expense of storing inventory for a specific period of time A) Purchase cost. B) Carrying cost. C) Financial cost. D) Storing cost. Show Answer Correct Answer: B) Carrying cost. 14. Which of the following is not a source of formal short term financing A) Bank overdraft. B) Commercial papers. C) Factoring services. D) Trade credit. Show Answer Correct Answer: D) Trade credit. 15. Which of the following is not a source of short-term financing? A) Bank loans. B) Trade credit. C) Long-term bonds. D) Commercial paper. Show Answer Correct Answer: C) Long-term bonds. 16. What is the main drawback of a conservative working capital policy? A) Lower liquidity. B) High risk of insolvency. C) Increased financing costs. D) Difficulty in obtaining short-term loans. Show Answer Correct Answer: C) Increased financing costs. 17. The cash conversion cycle (CCC) is defined as ..... A) Average Age of Inventory + Average collection period-Average Payable Period. B) Average Age of Inventory-Average collection Period-Average Payable Period. C) Average Age of Inventory + Average collection period + Average Payable Period. D) Average Age of Inventory-Average collection period + Average Payable Period. Show Answer Correct Answer: A) Average Age of Inventory + Average collection period-Average Payable Period. 18. Which of the following committee are related to micro financing A) Nayak committee. B) Tandon committee. C) Vyas committee. D) Narasimman committee. Show Answer Correct Answer: C) Vyas committee. 19. What is the economic order quantity for the following inventory policy:A firm sells 32, 000 bags of premium sugar per year. The cost per order is P200 and the firm experiences a carrying cost of P0.80 per bag? A) 2, 000 bags. B) 4, 000 bags. C) 8, 000 bags. D) 16, 000 bags. Show Answer Correct Answer: B) 4, 000 bags. 20. The relaxed current asset investment policy is one in which: A) Offer highest expected return. B) Provides liberal financing to customers. C) Current assets are turned over more frequently. D) Holding for cash, securities, inventories, and receivables are minimized. Show Answer Correct Answer: C) Current assets are turned over more frequently. ← PreviousNext →Related QuizzesWorking Capital Management Quiz 1Working Capital Management Quiz 2Working Capital Management Quiz 3Working Capital Management Quiz 4Working Capital Management Quiz 5Working Capital Management Quiz 6Working 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