Working Capital Management MCQ Questions and Answers for Practice

1. What is working capital?

1. Current assets - Current liabilities
2. Total assets - Total liabilities
3. Fixed assets - Current liabilities
4. Current assets - Fixed assets

2. What is the least liquid asset?

1. Inventory
2. Accounts receivable
3. Cash
4. Property, plant, and equipment

3. A shorter cash conversion cycle is generally considered to be

1. Better than a longer cash conversion cycle
2. Worse than a longer cash conversion cycle
3. The same as a longer cash conversion cycle
4. Not relevant to a company's financial performance

4. Which of the following is a technique for managing inventory?

1. Economic order quantity (EOQ)
2. Just-in-time (JIT) inventory management
3. ABC analysis
4. All of the above

5. What is the EOQ?

1. The optimal order quantity that minimizes the total cost of inventory
2. The maximum amount of inventory that can be held in stock
3. The minimum amount of inventory that must be kept on hand
4. The average amount of inventory held in stock

6. What is JIT inventory management?

1. A system that aims to minimize inventory levels by ordering and receiving goods only as needed
2. A system that uses a fixed order quantity
3. A system that uses a fixed order interval
4. A system that uses a safety stock

7. What is ABC analysis?

1. A method of classifying inventory items based on their value and importance
2. A method of forecasting inventory demand
3. A method of determining the optimal order quantity
4. A method of managing inventory levels using technology

8. Which of the following is a technique for managing accounts receivable?

1. Credit scoring
2. Credit policy
3. Collection efforts
4. All of the above

9. What is credit scoring?

1. A method of assessing the creditworthiness of a customer
2. A method of determining the optimal credit terms
3. A method of collecting overdue accounts receivable
4. A method of preventing fraud

10. What is a credit policy?

1. A set of rules that govern the granting of credit to customers
2. A method of collecting overdue accounts receivable
3. A method of preventing fraud
4. A method of determining the optimal credit terms

11. What are collection efforts?

1. Actions taken to collect overdue accounts receivable
2. A method of assessing the creditworthiness of a customer
3. A method of determining the optimal credit terms
4. A method of preventing fraud

12. Which of the following is a technique for managing cash?

1. Cash budgeting
2. Float management
3. Lockbox system
4. All of the above

13. Which of the following is NOT a component of working capital?

1. Cash
2. Inventory
3. Accounts receivable
4. Long-term debt

14. What is cash budgeting?

1. A forecast of a company's cash inflows and outflows
2. A method of managing bank accounts
3. A method of investing excess cash
4. A method of borrowing money

15. What is float management?

1. The time between when a check is written and when it clears the bank
2. The time between when a customer pays an invoice and when the payment is received
3. The time between when a company orders inventory and when it is received
4. The time between when a company borrows money and when it must repay the loan