Current Assets Quiz - Mrs. Blank

What does a company use its financial capital for?

• To acquire assets and finance operations

• To pay bills from suppliers

• To launch a new product line

• To pay dividends to owners

What are current assets?

• Assets that can be converted into cash within a year

• Assets that are used for long-term investments

• Assets that generate income or profit

• Assets that are owed to the company by its debtors

Which of the following is considered a cash equivalent?

• Commercial paper

• Accounts receivable

• Inventory

• Stocks

What is the purpose of holding cash equivalents?

• To earn a better return than holding actual cash

• To increase sales through credit purchases

• To reduce costs and improve efficiency

• To purchase assets with potential for income or profit

What are accounts receivable?

• Money owed to a company by its debtors

• Stocks of finished goods and materials

• Assets that can be converted into cash within a year

• Assets purchased with potential to produce income or profit

Why can credit sales create cash flow problems for a company?

• They delay the receiving of cash needed to meet financial obligations

• They increase the cost of storing and handling inventory

• They leave the company vulnerable to supply disruptions

• They reduce the return on investment for owners

What are inventories?

• Stocks of finished goods, work-in-progress parts, and materials

• Assets that can be converted into cash within a year

• Assets purchased with potential to produce income or profit

• Safe and highly liquid assets listed with cash holdings

Why do many manufacturing companies aim to keep their inventories as low as possible?

• To reduce costs and improve efficiency

• To earn a better return than holding actual cash

• To increase sales through credit purchases

• To purchase assets with potential for income or profit

What are financial investments?

• Assets purchased with potential to produce income or profit

• Money owed to a company by its debtors

• Stocks of finished goods, work-in-progress parts, and materials

• Safe and highly liquid assets listed with cash holdings

Why do corporations invest in securities?

• For liquidity, rate of return, strategic position, and influence/acquisitions

• To reduce costs and improve efficiency

• To increase sales through credit purchases

• To purchase assets with potential for income or profit