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Working Capital Management for Cash Flow

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Working Capital Management for Cash Flow

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Questions and Answers

What is the alternative to debt and equity issuance when a company needs additional funding?

Increasing sales volume

Reducing labor costs

Unlocking cash in working capital (correct)

Investing in new projects

What is the primary purpose of working capital management?

To extract cash from a company's working capital (correct)

To increase sales volume

To reduce debt

To increase inventory levels

Which of the following is NOT a primary component of working capital?

Accounts receivable

Property, Plant, and Equipment (correct)

Cash

Inventory

What is the definition of working capital?

A company's current assets minus its current liabilities Signup and view all the answers

Why do the components of working capital tend to vary in proportion to the level of sales?

Because they are all dependent on sales volume Signup and view all the answers

What is the result of effective working capital management?

A significant source of cash Signup and view all the answers

What is the relationship between working capital and sales volume?

Working capital tends to vary in proportion to the level of sales Signup and view all the answers

Why is working capital management considered a tactical task?

Because it involves a considerable amount of tactical work on an ongoing basis Signup and view all the answers

What is the main difference between the components of working capital?

Their variation in proportion to the level of sales Signup and view all the answers

What is the treasurer's usual approach when a company requires additional funding?

First turn to debt or an equity issuance Signup and view all the answers