This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Working Capital Management – Quiz 8 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Working Capital Management Quiz 8 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. If the average balance of debtors has increased, which of the following might not show a change in general A) Average payables. B) Bad debts. C) Current ratio. D) Total sales. Show Answer Correct Answer: A) Average payables. 2. If average balance of debtors has increased, which of the following might not show a chance in general? A) Total sales. B) Bad debts. C) Average payables. D) Current ratio. Show Answer Correct Answer: C) Average payables. 3. Which of the following is the danger of too high amount of working capital A) It results in unnecessary accumulation of inventory and gives chance to inventory mishandling, wastage. B) Excess working capital means idle funds which earns no profits for the business. C) It results in overall inefficiency. D) All of above. Show Answer Correct Answer: D) All of above. 4. Commercial paper is a type of A) Equity share capital. B) Unsecured short term book Dept. C) Fixed coupon bonds. D) Government bonds. Show Answer Correct Answer: B) Unsecured short term book Dept. 5. Commercial paper are generally issued at a price A) Equal to face value. B) More than face value. C) Equal to redemption value. D) Less than face value. Show Answer Correct Answer: D) Less than face value. 6. Permanent working capital A) Includes fixed assets. B) Varies with seasonal needs. C) Includes accounts payable. D) Is the amount of current assets required to meet a firm's long-term minimum needs. Show Answer Correct Answer: D) Is the amount of current assets required to meet a firm's long-term minimum needs. 7. Another term for "stock" (in the context working capital) A) Shares of a company. B) Inventory of finished or unfinished goods or unused raw materials. C) Price sold on the stock market. D) None of above. Show Answer Correct Answer: B) Inventory of finished or unfinished goods or unused raw materials. 8. Increasing the credit periods from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in A) An increase in the average collection period. B) High profits. C) A decrease in bad debt losses. D) An increase in sales. Show Answer Correct Answer: A) An increase in the average collection period. 9. Commercial bills will always A) Pay coupons. B) Trade at a premium prior to maturity. C) Pay interest on a compounding basis. D) Trade at a discount prior to maturity. Show Answer Correct Answer: D) Trade at a discount prior to maturity. 10. Trade credit is usually allowed for A) 3 days. B) 2 weeks. C) 30 days. D) 6 months. Show Answer Correct Answer: D) 6 months. 11. A conservative policy for financing working capital is one where short-term finance is used to fund: A) All of the fluctuating current assets, but no part of the permanent current assets. B) All of the fluctuating current assets and part of the permanent current assets. C) Part of the fluctuating current assets and part of the permanent current assets. D) Part of the fluctuating current assets, but no part of the permanent current assets. Show Answer Correct Answer: D) Part of the fluctuating current assets, but no part of the permanent current assets. 12. Current liabilities are debts that have to be paid ..... A) In the next 5 years or more. B) In the next 12 months. C) To buy more working capital. D) In order to buy a current asset. Show Answer Correct Answer: B) In the next 12 months. 13. What is cost of stock of Finished goods in Q.1 of test A) 204, 000. B) 20, 40, 000. C) 420, 000. D) None of these. Show Answer Correct Answer: B) 20, 40, 000. 14. Unsecured notes usually pay A) Fixed coupons. B) Floating coupons. C) No coupons. D) 6 and floating coupons. Show Answer Correct Answer: A) Fixed coupons. 15. In India commercial papers are issued as per the guidelines issued by A) Stock Exchange board of India. B) Reserve Bank of India. C) Forward market commission. D) None of above. Show Answer Correct Answer: B) Reserve Bank of India. 16. Which of the following factors, is least likely to be a main factors in deciding the collection methods used in the recovery of an over due account A) Cost of collection activity. B) Amount overdue. C) Cost of credit. D) Type of customer. Show Answer Correct Answer: C) Cost of credit. 17. The most basic requirement for a firm marketable securities A) Safety. B) Yielding. C) Marketability. D) None of Above. Show Answer Correct Answer: A) Safety. 18. All current assets of the company before deducting short-term liabilities and other obligations that must be fulfilled immediately are: A) Absolute Liquidity Ratio. B) Acid Test Ratio. C) Current Ratio. D) Net Working Capital. E) Gross Working Capital. Show Answer Correct Answer: E) Gross Working Capital. 19. If credit purchases are £5, 000 a day and the average accounts payable balance is £250, 000, calculate the average settlement period for accounts payable? A) 14 days. B) 152 days. C) 183 days. D) 50 days. Show Answer Correct Answer: D) 50 days. 20. Which of the following is considered a current liability on a company's balance sheet? A) Machinery. B) Long-term loans. C) Common stock. D) Accounts payable. Show Answer Correct Answer: D) Accounts payable. 21. Current liabilities is the obligation owed by the firm that are expected to come due within one year. A) False. B) True. Show Answer Correct Answer: B) True. 22. If a company's average inventory is £200, 000 and average cost of sales are £100, 000 a month, calculate the average inventories turnover period? A) 140 days. B) 73 days. C) 17 days. D) 61 days. Show Answer Correct Answer: D) 61 days. 23. The process of converting inventory into finished goods and eventually into sales and cash is called: A) Inventory conversion cycle. B) Cash conversion cycle. C) Receivables conversion cycle. D) Operating cycle. Show Answer Correct Answer: D) Operating cycle. 24. Below are the reason for holding cash except: A) Retaining motive. B) Compensating motive. C) Speculative motive. D) Transaction motive. Show Answer Correct Answer: A) Retaining motive. 25. Which of the following is/are direct costs associated with inventory?I. Acquisition costsII. Carrying costsIII. Order costs A) I only. B) I and II. C) II and III. D) I, II, and III. Show Answer Correct Answer: D) I, II, and III. 26. What is the formula for the Quick Ratio (Acid-Test Ratio)? A) (Current Assets-Inventory) / Current Liabilities. B) Current Assets / Current Liabilities. C) (Total Assets-Total Liabilities) / Total Assets. D) (Current Assets-Current Liabilities) / Total Liabilities. Show Answer Correct Answer: A) (Current Assets-Inventory) / Current Liabilities. 27. Which of the following refer to speculative balance? A) Reserve balance required by banks for providing loans. B) Reserve for unforeseen fluctuations. C) Enable the firm to take advantages of bargain purchases. D) Provide cash needed to conduct normal business operation. Show Answer Correct Answer: C) Enable the firm to take advantages of bargain purchases. 28. An organization would usually offer credit terms of 2/10, n/30 when A) The organization can borrow funds at a rate exceeding the annual interest cost. B) The organization can borrow funds at a rate less than the annual interest cost. C) The cost of capital approaches the prime rate. D) Most competitors are offering the same terms, and the organization has a shortage of cash. Show Answer Correct Answer: D) Most competitors are offering the same terms, and the organization has a shortage of cash. 29. Positive working capital shows that firm may not able to meet it current liabilities. A) True. B) False. Show Answer Correct Answer: B) False. 30. ABC Analysis is useful for analyzing the inventories A) Based on their Quality. B) Based on their Usage and value. C) Based on Physical Volume. D) All of the above. E) Not aware of. Show Answer Correct Answer: B) Based on their Usage and value. ← PreviousNext →Related 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 9Working Capital Management Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books