FM2 - WC

Which of the following is the primary objective of working capital management?

• Maximizing long-term investments

• Minimizing short-term liabilities

• Maximizing profitability while maintaining liquidity

• Minimizing inventory turnover

Which working capital policy maintains a higher level of current assets relative to current liabilities?

• Aggressive policy

• Conservative policy

• Moderate policy

• Flexible policy

Which policy seeks to strike a balance between risk and profitability by maintaining moderate levels of current assets and current liabilities?

• Aggressive policy

• Conservative policy

• Hedging (Moderate) policy

• Flexible policy

An aggressive working capital policy aims to:

• Maximize profitability by minimizing liquidity

• Minimize profitability by maximizing liquidity

• Maximize liquidity by maximizing profitability

• Minimize liquidity by minimizing profitability

Which factor is NOT considered when determining the appropriate working capital policy for a company?

• Industry norms

• Sales forecasts

• Employee turnover rate

• Risk tolerance

Which working capital management strategy focuses on reducing the cash conversion cycle?

• Conservative strategy

• Aggressive strategy

• Moderate strategy

• Flexible strategy

A lenient credit policy may lead to:

• Decreased accounts receivable

• Increased liquidity

• Increased sales but increased accounts receivable

• Decreased sales

Which of the following is a technique used in working capital management to improve cash flow?

• Increasing inventory levels

• Extending accounts payable periods

• Accelerating accounts receivable collection

• Decreasing short-term financing

Holding excess inventory leads to:

• Reduced carrying costs

• Increased liquidity

• Increased risk of stockouts

• Decreased sales

Efficient working capital management contributes to the overall financial health of a company by:

• Maximizing costs associated with excess working capital

• Minimizing profitability and liquidity

• Maximizing liquidity and minimizing profitability

• Maximizing profitability while optimizing the use of resources