This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Working Capital Management – Quiz 10 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 10 (27 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What is a working capital? A) It is the capital used for running day-to-day operations. B) It is referred to as circulating capital. C) Both. D) None of above. Show Answer Correct Answer: C) Both. 2. Compared to other firms in the industry, a company that maintains a conservative working capital policy will tend to have a A) Greater risk of needing to sell current assets to repay debt. B) Greater percentage of short-term financing. C) Higher ratio of current assets to fixed assets. D) Higher total asset turnover. Show Answer Correct Answer: C) Higher ratio of current assets to fixed assets. 3. Which of the following would be consistent with a more aggressive approach to financing working capital? A) Financing seasonal needs with short-term funds. B) Financing some long-term needs with short-term funds. C) Financing short-term needs with short-term funds. D) Financing permanent inventory buildup with long-term debt. Show Answer Correct Answer: B) Financing some long-term needs with short-term funds. 4. It is the difference between operating current assets and operating current liabilities. A) Net Operating Working Capital. B) Permanent/Fixed Working Capital. C) Net Working Capital. D) None of above. Show Answer Correct Answer: A) Net Operating Working Capital. 5. Net working capital is defined as ..... A) Total assets minus total liabilities. B) Current liabilities minus current assets. C) Current assets minus current liabilities. D) Total liabilities minus total assets. Show Answer Correct Answer: C) Current assets minus current liabilities. 6. The cash conversion cycle is determined by three components, including ..... A) A. Average age of inventory. B) B. Accounts receivable collection period. C) Answers a and b are correct. D) Answers a and b are incorrect. Show Answer Correct Answer: C) Answers a and b are correct. 7. When the ratio of current liabilities to total assets increases, the risk of bankruptcy decreases because an increase in current liabilities will increase net working capital. The statement: A) Salah. B) Correct. Show Answer Correct Answer: A) Salah. 8. Which working capital policy takes a moderate approach, maintaining a balance between risk and profitability? A) Conservative Policy. B) Hedging policy. C) Matching Policy. D) Aggressive policy. Show Answer Correct Answer: C) Matching Policy. 9. Which of the following is an example of a temporary source of financing used by businesses to cover short-term needs? A) Long-term bank loans. B) Issuing common share. C) Short term notes payable. D) Wages and salaries payable. Show Answer Correct Answer: C) Short term notes payable. 10. If the ratio of current asset/total asset increasing profit will increase but risk will decrease. A) False. B) True. Show Answer Correct Answer: B) True. 11. Financing a long-lived asset with short-term financing would be A) An example of "high risk high (potential) profitability" asset financing. B) An example of the "hedging approach" to financing. C) An example of "low risk low (potential) profitability" asset financing. D) An example of "moderate risk moderate (potential) profitability" asset financing. Show Answer Correct Answer: A) An example of "high risk high (potential) profitability" asset financing. 12. Evertz Metals buys and stockpiles dolomite to use in its smelting processes. Before all this dolomite is used, however, they alter their smelting process so that calcite limestone is used instead. How is the inventory cost of the unused dolomite best categorized? A) An acquisition cost. B) An order cost. C) A holding cost. D) A carrying cost. Show Answer Correct Answer: D) A carrying cost. 13. Which of the following working capital management strategies focuses on minimizing the investment in current assets while maintaining a reasonable level of liquidity? A) Aggressive working capital policy. B) Moderate working capital policy. C) Conservative working capital policy. D) Neutral working capital policy. Show Answer Correct Answer: C) Conservative working capital policy. 14. The period when credit is outstanding has to financed, which of the following methods will not assist the financing of credit? A) Bank over draft. B) Factoring and invoice discounting. C) Purchase of fixed assets. D) Operational cash flow. Show Answer Correct Answer: C) Purchase of fixed assets. 15. Suppose ABC Ltd has been offered credit terms from its major supplier of 2/10, net 45 days. What is the cost of NOT taking the discount? A) 17.8%. B) 10.9%. C) 14.3%. D) 23.5%. Show Answer Correct Answer: D) 23.5%. 16. The goal of cash management is to achieve the following except: A) To maintain its credit rating. B) Minimized the amount of cash the firm must hold. C) To take trade discount. D) To meet unexpected cash needed. Show Answer Correct Answer: B) Minimized the amount of cash the firm must hold. 17. Float management is related to A) Cash management. B) Receivable management. C) Inventory management. D) None of above. Show Answer Correct Answer: A) Cash management. 18. Trade Receivables are expected to be released in cash within the normal operating cycle or one year. A) False. B) True. Show Answer Correct Answer: B) True. 19. Which of the following is not considered by MIller-Orr MOdel A) Variability in cash requirement. B) Total annual requirement of cash. C) Holding Cost. D) Cost of transaction. Show Answer Correct Answer: B) Total annual requirement of cash. 20. The company's current assets are IDR 415, 000, 000 and its current liabilities are IDR 305, 000, 000, so the amount of net working capital is..... A) 620.000.000. B) 415.000.000. C) 210.000.000. D) There is no right answer. Show Answer Correct Answer: C) 210.000.000. 21. Below are all components of working capital except: A) Cash. B) Marketable securities. C) Note payable. D) Inventories. Show Answer Correct Answer: C) Note payable. 22. Which among the following components is calculated as the sum of the fixed cost that happen each time an item is ordered A) Storing cost. B) Carrying cost. C) Holding cost. D) Ordering cost. Show Answer Correct Answer: D) Ordering cost. 23. Firms typically would prefer a positive cash conversion cycle versus a negative cash conversion cycle. A) True. B) False. Show Answer Correct Answer: B) False. 24. The restricted current asset investment policy offers the lowest expected return coupled with the lowest risk. A) False. B) True. Show Answer Correct Answer: A) False. 25. Which of the following is not a component of current assets? A) Inventory. B) Accounts Receivable. C) Land and Buildings. D) Cash. Show Answer Correct Answer: C) Land and Buildings. 26. What does a negative working capital indicate? A) Excessive liquidity. B) Financial distress. C) Efficient operations. D) Strong profitability. Show Answer Correct Answer: B) Financial distress. 27. Which of the following is not a type of current liability A) Payables. B) Receivables. C) Both A and B. D) None of above. Show Answer Correct Answer: B) Receivables. ← PreviousRelated QuizzesFinance 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 7Working Capital Management Quiz 8Working Capital Management Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books