Working Capital Management

Working Capital Management

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Question 1 of 7

1. Question
Managing and Measuring Liquidity

Which of the following are considered primary sources of liquidity?
- Lines of credit from banks
- Filing for bankruptcy
- Selling off existing inventory
- Trade credit from suppliers
- Selling off debt securities classified as held-to-maturity
- Selling off T-bills held by the company
- Collecting payments owed by customers
- Renegotiating debt agreements with creditors
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Question 2 of 7

2. Question
Managing and Measuring Liquidity

A company has the following turnover ratios.

Payables turnover = 8.8
Inventory turnover = 4.7
Receivables turnover = 9.5

The cash conversion cycle of the company is closest to _____ days
- 75
- 65
- 55
Correct

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Question 3 of 7

3. Question
Sources of Funds

Which of the following affect the daily cash position of a company?
- payment of employee salary
- receipt of cash from a subsidiary
- payment of stock dividend
- buying supplies on trade credit
- payment of income tax
- write-off inventory
Correct

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Question 4 of 7

4. Question
Sources of Funds

A credit that states “1/12 Net 60” means:
- 1/12% interest charge is applied each day for payments past 60 days from date of invoice
- 1/12% discount for each day of early payment before 60 days from date of invoice
- 1% discount for payment made within 12 days from date of invoice. Full amount is due on 60th day from date of invoice.
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Question 5 of 7

5. Question
Managing and Measuring Liquidity

An analyst observed that the number of days of inventory on hand for a memory chip manufacturer has been steadily increasing. Which of these is LEAST likely a reason for the trend?
- The prices of memory chips has been falling, so the company has been making sales at a lower price
- The company has difficulty clearing its inventory of memory chips
- The company is anticipating higher demand for memory chips
Correct

Incorrect
Question 6 of 7

6. Question
Managing and Measuring Liquidity

An analyst noticed that the number of days of payables for a firm has been trending down. Which of the following is the LEAST likely reason?
- The interest rates for short-term credit has been falling.
- The company's relationships with its supplier has been deteriorating.
- The company's customers has been paying up early.
Correct

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Question 7 of 7

7. Question
Evaluating Short-Term Financing Choices

Which of the following sources of short-term financing is LEAST likely to be available to a small company?
- A loan with a bank requiring inventory as collateral
- A loan from a nonbank finance company
- A revolving line of credit from a bank
Correct

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Welcome to PrepNuggets

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PrepNuggets

Keith is the founder and chief instructor of PrepNuggets. He has a wide range of interests in all things related to tech, from web development to e-learning, gadgets to apps. Keith loves exploring different cultures and the untouched gems around the world. He currently lives in Singapore but frequently travels to share his knowledge and expertise with others.

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