MIDTERMS 7-8 WEEK

Question 1

Changes in working capital will impact a business’ cash flow. When it
increases, the effect on cash flow is positive. TRUE OR FALSE

Answer 1

FALSE

Question 2

among the many important things that contribute to the
success of a business. Without it, a business may cease to function properly or at
all.

Answer 2

Working capital

Question 3

When a company has too little working capital, it can face financial difficulties and
may even be forced toward bankruptcy. TRUE OR FALSE

Answer 3

TRUE

Question 4

In some types of businesses, it is not as much of a problem to have a lower
amount of working capital. TRUE OR FALSE

Answer 4

TRUE

Question 5

Is a business accounting term referring
to the liquid assets immediately accessible to a company.

Answer 5

Working capital

Question 6

Is the practice of researching and planning a company’s assets,
debts and incoming cash flow to ensure that the organization has enough capital to operate.

Answer 6

Working capital Management

Question 7

Working capital management Involves looking at these numbers and
using them to plan a company’s long-term future. TRUE OR FALSE

Answer 7

FALSE

Question 8

Four Distinct Fields OF WCM

Answer 8

cash management
inventory
management
debtor’s
management
short-term financing

Question 9

the
managerial accounting strategy of
constantly monitoring a company’s cash
status as money comes in and goes out
on a daily basis.

Answer 9

Cash management

Question 10

Involves
applying techniques to increase efficiency
in production in order to reduce overhead

Answer 10

Inventory management

Question 11

involves
identifying appropriate credit policies that
will attract customers and ensure regular
income from payments.

Answer 11

Debtor’s management

Question 12

is the ability to
seek out bank loans that can bridge a
financial gap for a short period of time
and can be repaid quickly.

Answer 12

Short-term financing

Question 13

is the total cash, and cash equivalents, that a business
has on-hand. It also generally deals with all
corporate assets.

Answer 13

Gross Working Capital

Question 14

(current assets or circulating capital) may include:
inventory, accounts receivable, and investments, such as
marketable securities, which may be liquidated within the calendar
year.

Answer 14

Cash equivalents

Question 15

is the amount of
assets or cash that remain after
subtracting a company’s liabilities from its
total current assets.

Answer 15

Net working capital

Question 16

Negative Net Working Capital happens when the amount of the gross working capital
exceeds the amount of current liabilities. TRUE OR FALSE

Answer 16

FALSE (POSITIVE Net Working Capital)

Question 17

Positive Net Working Capitaloccurs when the reverse is true, and the liabilities exceed
the assets. TRUE OR FALSE

Answer 17

FALSE (NEGATIVE Net Working Capital)

Question 18

Balancing these two amounts is commonly the
responsibility of a corporate financial manager

Answer 18

Short-term financial management

Question 19

refers to how quickly any aspect of the current assets, such as the
inventory and marketable securities, can be converted into liquid cash.
These funds are then used to pay corporate bills when they come due.

Answer 19

Cash inflow

Question 20

measures a company’s
liquidity, efficiency, and overall
financial health at the time
when it is calculated.

Answer 20

Networking Capital

Question 21

indicates that a
company has the ability to pay
its debts and make
improvements.

Answer 21

positive ratio

Question 22

WORKING CAPITAL
MANAGEMENT generates the elements of cost namely?

Answer 22

Materials, wages and expenses

Question 23

Working capital helps the possibility of under- capitalization. TRUE OR FALSE

Answer 23

FALSE

Question 24

is financing that is provided for a period of more than
one calendar year. It also a way to manage the costs of the project in a manner that
provides time for the project to begin generating revenue
on its own.

Answer 24

Long-Term Financing

Question 25

Before committing to any type of long-term financing, it is important to read and understand
all the terms and conditions found in the contract that will govern the loan. TRUE OR FALSE

Answer 25

TRUE

Question 26

is a party that has a claim on the services of a second party. is a party that has a
claim on the services of a second party.

Answer 26

Creditors

Question 27

It is ok to not pick up stock of raw materials even during economic depression. TRUE OR FALSE

Answer 27

FALSE

Question 28

Without adequate working capital an entity can meet its short-term liabilities in time.TRUE OR FALSE

Answer 28

FALSE

Question 29

Establish unlimited credits for each customer… and stick to them. TRUE OR FALSE?

Answer 29

FALSE