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 (A)</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 (B)</p> Signup and view all the answers

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

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

What does working capital management primarily focus on?

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

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

<p>Accounts Receivable and Finished Goods (C)</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 (B)</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 (D)</p> Signup and view all the answers

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