B3: Working Capital Management

Question 1

What is Working Capital

Answer 1

it is the difference between current assets and current liabilities

Question 2

what is the cash conversion cycle (net operating cycle)

Answer 2

It is the length of time from the date of initial expenditure for production to the date cash is collected from the customers and the vendors are paid for the initial expenditures

Question 3

What is the inventory turnover ratio

Answer 3

it is the number of times a year inventory is sold

Question 4

What is the inventory conversion period

Answer 4

it is the number of average days inventory is held before it is sold

Question 5

What is the accounts receivable turnover ratio

Answer 5

it measures the number of times receivables are collected over an accounting period

Question 6

What is the accounts receivable collection period

Answer 6

it is the number of days after a typical credit sale is made until the firm receives payment

Question 7

What is the accounts payable turnover ratio

Answer 7

it is the number of times a year a company pays its suppliers

Question 8

What is the accounts payable deferrable period

Answer 8

it is the average number of days it takes for a company to pay its suppliers