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?

<p>A company's current assets minus its current liabilities (D)</p> Signup and view all the answers

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

<p>Because they are all dependent on sales volume (D)</p> Signup and view all the answers

What is the result of effective working capital management?

<p>A significant source of cash (A)</p> Signup and view all the answers

What is the relationship between working capital and sales volume?

<p>Working capital tends to vary in proportion to the level of sales (A)</p> Signup and view all the answers

Why is working capital management considered a tactical task?

<p>Because it involves a considerable amount of tactical work on an ongoing basis (C)</p> Signup and view all the answers

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

<p>Their variation in proportion to the level of sales (D)</p> Signup and view all the answers

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

<p>First turn to debt or an equity issuance (B)</p> Signup and view all the answers

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