[Quiz] Feb 4 Flashcards
What is the primary focus of working capital management?
A) Long-term assets and liabilities
B) Short-term assets and liabilities
C) Equity financing
D) Dividend policy
B) Short-term assets and liabilities
Which of the following is considered a current asset?
A) Equipment
B) Patents
C) Inventory
D) Bonds payable
C) Inventory
The formula for Net Working Capital is
A) Current Assets + Current Liabilities
B) Current Assets - Current Liabilities
C) Total Assets - Total Liabilities
D) Fixed Assets - Current Liabilities
B) Current Assets - Current Liabilities
Which policy involves financing all fixed assets and part of current assets with long-term funds?
A) Aggressive policy
B) Conservative policy
C) Moderate policy
D) Matching policy
B) Conservative policy
The Cash Conversion Cycle is calculated as:
A) Inventory Period + Receivables Period - Payables Period
B) Inventory Period - Receivables Period + Payables Period
C) Receivables Period + Payables Period - Inventory Period
D) Inventory Period + Payables Period - Receivables Period
A) Inventory Period + Receivables Period - Payables Period
A firm that finances its permanent current assets and fixed assets with long-term financing, and temporary current assets with short-term financing, is following which policy?
A) Aggressive policy
B) Conservative policy
C) Matching policy
D) Speculative policy
C) Matching policy*
Which of the following is NOT a component of working capital?
A) Accounts receivable
B) Accounts payable
C) Inventory
D) Plant and equipment
D) Plant and equipment
The term ‘working capital’ refers to:
A) Capital invested in long-term assets
B) Capital required for day-to-day operations
C) Total assets minus total liabilities
D) Equity capital
B) Capital required for day-to-day operations
The primary objective of working capital management is to:
A) Maximize the firm’s profitability
B) Ensure the firm can meet its short-term obligations
C) Minimize the firm’s tax liability
D) Maximize the firm’s market share
B) Ensure the firm can meet its short-term obligations
Which of the following is a permanent working capital requirement?
A) Seasonal inventory build-up
B) Minimum cash balance
C) Accounts payable
D) Short-term loans
B) Minimum cash balance
An aggressive working capital policy is characterized by:
A) High levels of current assets
B) Low levels of current liabilities
C) Financing permanent assets with short-term debt
D) Financing temporary assets with long-term debt
C) Financing permanent assets with short-term debt
The term ‘liquidity’ in financial management refers to:
A) The firm’s ability to meet long-term obligations
B) The firm’s ability to convert assets into cash quickly
C) The firm’s profitability
D) The firm’s capital structure
B) The firm’s ability to convert assets into cash quickly
Which of the following ratios measures a firm’s short-term liquidity?
A) Debt-to-equity ratio
B) Current ratio
C) Return on equity
D) Price-to-earnings ratio
B) Current ratio
Which of the following is a characteristic of a conservative working
capital policy?
A) High risk and high return
B) Low risk and low return
C) High risk and low return
D) Low risk and high return
B) Low risk and low return
Which of the following is an example of a current liability?
A) Bonds payable
B) Mortgage payable
C) Accounts payable
D) Equipment loan
C) Accounts payable
The formula for Net Working Capital is:
A) Current Assets + Current Liabilities
B) Current Assets - Current Liabilities
C) Total Assets - Total Liabilities
D) Fixed Assets - Current Liabilities
B) Current Assets - Current Liabilities
Which policy involves financing all fixed assets and part of current assets with long-term funds?
A) Aggressive policy
B) Conservative policy
C) Moderate policy
D) Matching policy
B) Conservative policy
The term ‘liquidity’ in financial management refers to:
A) The firm’s ability to meet long-term obligations
B) The firm’s ability to convert assets into cash quickly
C) The firm’s profitability
D) The firm’s capital structure
B) The firm’s ability to convert assets into cash quickly
