Principles of Working Capital Management Quiz

Investing in current assets

Necessity of managing both current assets and current liabilities

Proper mix of short-term and long-term financing for current assets

<p>Current assets can be adjusted with sales fluctuations in the short run</p> Signup and view all the answers

<p>Reduces the overall profitability</p> Signup and view all the answers

<p>The operating cycle refers to the time it takes for a company to convert its current assets into cash. Investing in current assets is necessary to ensure smooth operations and meet short-term obligations.</p> Signup and view all the answers

<p>Managing current assets and liabilities is essential to maintain liquidity, optimize working capital, and ensure the company's ability to meet its short-term financial obligations.</p> Signup and view all the answers

<p>The proper mix involves balancing the use of short-term and long-term financing to fund current assets, taking into account cost, risk, and flexibility.</p> Signup and view all the answers

<p>The differences include the importance of time in managing fixed assets, the impact of large holding of current assets on overall profitability, and the adjustability of current assets with sales fluctuations in the short run.</p> Signup and view all the answers

<p>Expected sales influence the levels of fixed and current assets, but only current assets can be adjusted with sales fluctuations in the short run, making it crucial to manage current assets effectively.</p> Signup and view all the answers