Capital

The longer the firm's accounts payable period, the:

• longer the firm's cash conversion cycle is.

• shorter the firm's inventory period is.

• more the delay in the accounts receivable period.

• less the firm must invest in working capital.

Which is one of two parts of the permanent working capital?

• Gross Working Capital

• Reserve Working Capital

• Fluctuating Working Capital

• Net Working Capital

Dinh Company has a payments cycle of 30 days, a receivables conversion period of 45 days and an inventory conversion period of 60 days. What is the length of the firm’s caconversion cycle?

• 90 days

• 54 days

• 105 days

• 75 days

Which is the right equation to compute net working capital?

• current assets − payables

• cash − payables

• current assets − current liabilities

• cash − current liabilities

What are the potential downsides of working capital management?

• It only focuses on short-term assets and liabilities, neglecting the long-term financial health of the company.

• It guarantees increased profitability for the company.

• It addresses both short-term and long-term financial aspects of the company.

• It eliminates the need for sales growth and cost control measures.

How to determine whether a company's Day Sales Outstanding ( DSO) ratio is high or low?

• All are correct

• Comparing to its historical performance

• Comparing to its peers/competitors.

• Comparing to the overall industry.

Which Working Capital Ratio indicates that a company have a trouble meeting its short-term financial obligation ?

• 0.5

• 1.2

• 2.3

• All are correct

What is the primary purpose of working capital management?

• To maximize long-term profitability

• To meet short-term operating costs and debt obligations

• To minimize long-term debt obligations

• To maximize current assets and minimize current liabilities

Cash management is forecasting needs, maximizing inflow, minimizing outflow, monitoring cash balance

• True

• False

Both investors and bank loan officers should pay close attention to accounts receivable instead of accounts payable

• True

• False