Working Capital Management Quiz
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Questions and Answers

What is the primary purpose of working capital management?

  • To maximize long-term investments
  • To ensure sufficient cash flow for short-term operating costs and debt obligations (correct)
  • To eliminate current liabilities
  • To minimize current assets

    • What is the formula for net working capital?

  • Operating CA – Operating CL
  • Total current assets
  • Cash + Inv. + A/R - Accruals + A/P
  • Current assets - Current liabilities (correct)

    • What does the working capital cycle (operating cycle) include?

  • Accounts Payable and Work in progress
  • Raw Materials and Cash
  • Sales and Value Addition
  • Accounts Receivable and Finished Goods (correct)

    • What does working capital policy involve?

    <p>The level of each current asset and how they are financed</p> Signup and view all the answers

    What is the purpose of net operating working capital (NOWC)?

    <p>To measure the liquidity of operating assets after considering operating liabilities</p> Signup and view all the answers

    What is the formula for net operating working capital (NOWC)?

    <p>Operating CA – Operating CL</p> Signup and view all the answers

    What does working capital management primarily focus on?

    <p>Monitoring and utilizing current assets and liabilities</p> Signup and view all the answers

    What does the working capital cycle (operating cycle) include?

    <p>Accounts Receivable and Finished Goods</p> Signup and view all the answers

    What is the primary purpose of maintaining sufficient cash flow in working capital management?

    <p>To meet short-term operating costs and debt obligations</p> Signup and view all the answers

    What does the term 'working capital policy' involve?

    <p>Determining the level of each current asset and how they are financed</p> Signup and view all the answers

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