Working Capital And Cash Flow

Question 1

What are the two main objectives of working capital management ?

Answer 1

To increase profits.
To provide sufficient liquidity.

Question 2

How is inventory turnover period calculated?

Answer 2

Average inventory/ cost of sales x 365

Question 3

How is rate of inventory turnover calculated?

Answer 3

Cost of sales/average inventory

Question 4

How is receivables collection period calculated?

Answer 4

Average receivables/average sales revenue x 365

Question 5

How is payables payment period calculated?

Answer 5

Average payables/annual purchases x365

Question 6

How is raw materials holding period calculated?

Answer 6

Average inventory of raw materials/annual usage x365

Question 7

How is average production period calculated?

Answer 7

Average inventory of work in progress/annual cost of sales x365

Question 8

How is average inventory holding period calculated?

Answer 8

Average inventory of finished goods/annual cost of sales x365

Question 9

What’s are the two ways to finance trade receivables?

Answer 9

Invoice discounting.
Receivables factoring.