Mastering Working Capital
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Questions and Answers

What is one way a company can reduce its short-term debts to improve working capital?

  • Increase inventory reserves
  • Spend more internally
  • Extend credit to more customers
  • Avoid taking on unnecessary debt (correct)

    • Which of the following actions can improve a company's working capital?

  • Extending credit to customers (correct)
  • Increasing short-term debts
  • Reducing current assets
  • Spending more externally

    • How are cash flow and working capital related?

  • They are independent variables
  • Working capital is a component of cash flow
  • Cash flow is a component of working capital (correct)
  • They have no relationship

    • What is one way a company can improve its working capital by managing its current assets?

    <p>Prepaying expenses</p> Signup and view all the answers

    Why should a company be mindful of spending both externally and internally to improve working capital?

    <p>To avoid unnecessary borrowing</p> Signup and view all the answers

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