This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Working Capital Management – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 5 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Cost of not carrying sufficient inventory is known as A) Holding Cost. B) Not aware of. C) Total Cost. D) Stock Out Cost. E) Carrying Cost. 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 Sales has decreased. B) That the Profitability has gone up,. C) That debtors collection period has increased. D) That the Capital Employed has reduced. 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) P40, 000. B) P44, 444. C) P20, 000. D) Ba, 000. Show Answer Correct Answer: A) P40, 000. 5. The company's inability to fulfill short-term obligations and other obligations that must be fulfilled immediately is called: A) Legal Insolvency. B) Capital Insolvency. C) Accounting Insolvency. D) Risk Insolvency. E) Techincal Insolvency. Show Answer Correct Answer: E) 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) Minimizing the risk of financial distress or default. B) Holding minimal levels of liquid assets. C) Maximizing short-term borrowing for immediate investments. D) Pursuing aggressive expansion strategies. Show Answer Correct Answer: A) 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) 1.200.000. B) 1.000.000. C) 600.000. D) 200.000. Show Answer Correct Answer: D) 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) Storing cost. B) Financial cost. C) Purchase cost. D) Carrying cost. Show Answer Correct Answer: D) Carrying cost. 14. Which of the following is not a source of formal short term financing A) Bank overdraft. B) Trade credit. C) Commercial papers. D) Factoring services. Show Answer Correct Answer: B) Trade credit. 15. Which of the following is not a source of short-term financing? A) Long-term bonds. B) Commercial paper. C) Trade credit. D) Bank loans. Show Answer Correct Answer: A) Long-term bonds. 16. What is the main drawback of a conservative working capital policy? A) Lower liquidity. B) Increased financing costs. C) Difficulty in obtaining short-term loans. D) High risk of insolvency. Show Answer Correct Answer: B) 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: B) 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) 16, 000 bags. C) 4, 000 bags. D) 8, 000 bags. Show Answer Correct Answer: C) 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. 21. Short term loan can be classified as ..... A) Permanent source. B) Spontaneous source. C) Temporary asset. D) Temporary source. E) Permanent asset. Show Answer Correct Answer: D) Temporary source. 22. Factoring involves ..... A) Financing of export receivables. B) Providing long term loan. C) Management of receivables of borrowier. D) Providing short term loan. Show Answer Correct Answer: C) Management of receivables of borrowier. 23. Interest on corporate bonds is usually paid A) Annual. B) Six monthly. C) Only on maturity. D) Monthly basis. Show Answer Correct Answer: B) Six monthly. 24. EOQ determine the order size when A) Total cost is minimum. B) Total number of order is least. C) Total inventory cost are minimum. D) None of above. Show Answer Correct Answer: C) Total inventory cost are minimum. 25. In the context of current assets, what does the term 'liquidity' refer to? A) The market value of inventory. B) The ease of converting assets into cash without loss. C) The long-term value of assets. D) The total value of assets available for sale. Show Answer Correct Answer: B) The ease of converting assets into cash without loss. 26. Which of the following is not included in cost of inventory A) Transportation cost. B) Import duty. C) Purchasing cost. D) Selling cost. Show Answer Correct Answer: D) Selling cost. 27. Cheques deposited in bank may not be available for immediate use due to A) Receipt float. B) Payment float. C) Net float. D) Playing with float. Show Answer Correct Answer: A) Receipt float. 28. Which of the following would decrease a firm's cash conversion cycle? A) Increase the accounts payable days. B) Increase the cash days. C) Increase the inventory days. D) Increase the accounts receivable day. Show Answer Correct Answer: A) Increase the accounts payable days. 29. Which of the following is not a benefit of carrying inventory A) Reduction in ordering cost. B) Reduction carrying cost. C) Avoiding lost sales. D) Avoiding production shortage. Show Answer Correct Answer: B) Reduction carrying cost. 30. Which of the following is not an element of credit policy A) Collection policy. B) Credit terms. C) Sales price. D) Cash discount. Show Answer Correct Answer: C) Sales price. ← PreviousNext →Related QuizzesFinance QuizzesWorking Capital Management Quiz 1Working Capital Management Quiz 2Working Capital Management Quiz 3Working Capital Management Quiz 4Working 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