This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Working Capital Management – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 1 (30 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) Inventory Turnover Ratio. B) Net Profit Margin. C) Debt to Equity Ratio. D) Return on Assets (ROA). Show Answer Correct Answer: A) Inventory Turnover Ratio. 2. Anyone who has bought from a business without payment (buying on credit) is known as a ..... A) Creditor. B) Debtor. Show Answer Correct Answer: B) 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) Material. B) Production. C) Operating. D) Labour. Show Answer Correct Answer: A) Material. 4. What is working capital? A) Fixed assets. B) Long-term debt. C) Total assets. D) Current assets-Current liabilities. Show Answer Correct Answer: D) Current assets-Current liabilities. 5. A conservative funding strategy uses all funding with long term debt or equity. The statement: A) Salah. B) Correct. Show Answer Correct Answer: B) 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) Commercial bill. B) Factoring. C) Bank over draft. D) Trade credit. Show Answer Correct Answer: D) Trade credit. 8. Net working capital consisted with A) Current Liability minus current Assets. B) Fixed assets minus Current Liability. C) Current Assets minus Current Liability. D) Total assets minus Total Liability. Show Answer Correct Answer: C) 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) Motif Berhati-hati. C) Speculation Motive. D) Compensation balance motive. Show Answer Correct Answer: B) 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) False. B) True. Show Answer Correct Answer: B) 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) Reorder point model. B) Fixed order inventory control. C) Fixed order quantity order. D) EOQ MODEL. Show Answer Correct Answer: A) 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: B) ROL-(NORMAL CONSUMPTION *NORMAL DELIVERY TIME). 21. What is Cash Factory Cost in Q.1 of test A) 43, 02, 000. B) 34, 02, 000. C) 34, 20, 000. D) None of these. Show Answer Correct Answer: B) 34, 02, 000. 22. Net operating working capital is defined as: A) Current assets minus current liabilities. B) Current assets divided by current liabilities. C) Current assets minus non-interest bearing current liabilities. D) Current assets used in operations. Show Answer Correct Answer: A) Current assets minus current liabilities. 23. Which of the following is not a motive to hold cash? A) Transactionary Motive. B) Pre-scautionary Motive. C) Capital Investment. D) None of the above. E) Not aware of. Show Answer Correct Answer: C) Capital Investment. 24. What represents a permanent source of financing for a company? A) Trade credit. B) Common Share. C) Commercial paper. D) Short-term bank loans. Show Answer Correct Answer: B) Common Share. 25. To financial analysts, "Working Capital" means the same as: A) Current Assets-Current Liabilities. B) Total Assets-Current Liabilities. C) Current Assets-Total Liabilities. D) Total Assets-Total Liabilities. Show Answer Correct Answer: A) Current Assets-Current Liabilities. 26. Below are the elements of credit policy except: A) Cash discount. B) Trade credit. C) Credit period. D) Credit standard. Show Answer Correct Answer: B) Trade credit. 27. Buffer stock is the level of stock A) Minimum stock level below which actual. B) Half of the actual stock. C) At which the ordering process should start. D) Maximum stock in inventory. Show Answer Correct Answer: A) Minimum stock level below which actual. 28. Activities related to coordinating, controlling and planning flow of inventory are classified as A) Manufacturing Management. B) Decisional management. C) Throughput management. D) Inventory management. Show Answer Correct Answer: D) Inventory management. 29. Which of the following is a liability of a bank A) Certificate of deposits. B) Junk bonds. C) Treasury bills. D) Commercial papers. Show Answer Correct Answer: A) Certificate of deposits. 30. Concentration banking helps in A) Reducing idle bank balance. B) Increasing collections. C) Increasing craters. D) Reducing Bank transactions. Show Answer Correct Answer: B) Increasing collections. Next →Related QuizzesFinance 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 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books