BSM219 Topic 2 Review Quiz

Q1. Which of the following is NOT a key element of working capital?

• Trade Payables

• Cash

• Loan

• Inventories

Q2. Which of the following is a perceived benefit of offering credit to customers?

• Administration

• Bad debts

• Cash in hand

• More sales

Q3. Which of the following is preferred?

• Credit provided to customers should be longer than the credit provided by suppliers

• Credit provided to customers should be shorter than the credit provided by suppliers

Q4. Which of the following transactions effect Cash, but not Profit? Select all that apply.

• Loan repayment

• Sale made on credit

• Cash paid to acquire fixed asset

• Purchase of inventory on credit

Q5. If a company wants to reduce its overdraft, it should increase its settlement period for accounts receivable.

• True

• False

Q6. Raw materials, accounts receivable, plant and machinery, and finished goods are all elements of working capital.  

• True

• False

Q7. Credit sales are £52,000 a week and the average accounts receivable balance is £200,000. What is the average settlement period for accounts receivable?

• 33 days

• 27 days

• 45 days

• 38 days

Q8. Credit purchases are £5,000 a day and the average accounts payable balance is £250,000. What is the average settlement period for accounts payable?

• 45 days

• 67 days

• 50 days

• 55 days

Q9. Average inventories held is £200,000 and cost of sales are £100,000 a month. What is the average inventories turnover period?

• 58 days

• 92 days

• 61 days

• 73 days

Q10. Which of the following should you aim to increase to improve the cash conversion cycle?

• Average settlement period for accounts payable

• Average inventories turnover period

• Average settlement period for accounts receivable