Working Capital Management Questions and Answers | Online Quiz for Practice

46. What is the operating cycle?

1. The time it takes to convert inventory into cash
2. The time it takes to pay off long-term debt
3. The time it takes to collect accounts receivable
4. The time it takes to produce and sell a product

47. What does the accounts receivable turnover ratio measure?

1. How efficiently a company collects its accounts receivable
2. How quickly a company sells its inventory
3. How much credit a company extends to its customers
4. How much credit a company receives from its suppliers

48. What is the days' sales outstanding (DSO)?

1. 365 days / Accounts receivable turnover ratio
2. 365 days x Accounts receivable turnover ratio
3. Accounts receivable / Net credit sales
4. Net credit sales / Accounts receivable

49. What does the DSO measure?

1. The average number of days it takes a company to collect its accounts receivable
2. The average number of days it takes a company to sell its inventory
3. The average number of days it takes a company to pay its accounts payable
4. The average number of days it takes a company to produce a product

50. What is the accounts payable turnover ratio?

1. Cost of goods sold / Average accounts payable
2. Average accounts payable / Cost of goods sold
3. Cost of goods sold / Total liabilities
4. Total liabilities / Cost of goods sold

51. What does the accounts payable turnover ratio measure?

1. How efficiently a company pays its suppliers
2. How quickly a company sells its inventory
3. How much credit a company extends to its customers
4. How much credit a company receives from its suppliers

52. What is the days' payables outstanding (DPO)?

1. 365 days / Accounts payable turnover ratio
2. 365 days x Accounts payable turnover ratio
3. Accounts payable / Cost of goods sold
4. Cost of goods sold / Accounts payable

53. What does the DPO measure?

1. The average number of days it takes a company to pay its suppliers
2. The average number of days it takes a company to collect its accounts receivable
3. The average number of days it takes a company to sell its inventory
4. The average number of days it takes a company to produce a product

54. What is the cash conversion cycle?

1. Days' sales in inventory + Days' sales outstanding - Days' payables outstanding
2. Days' sales in inventory - Days' sales outstanding + Days' payables outstanding
3. Days' sales outstanding - Days' sales in inventory + Days' payables outstanding
4. Days' payables outstanding - Days' sales in inventory - Days' sales outstanding

55. What does the cash conversion cycle measure?

1. The length of time it takes a company to convert its investments in inventory and accounts receivable into cash
2. The length of time it takes a company to pay its suppliers
3. The length of time it takes a company to collect its accounts receivable
4. The length of time it takes a company to sell its inventory

56. 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

57. What is the cash conversion cycle?

1. The time it takes to convert inventory into cash
2. The time it takes to pay off long-term debt
3. The time it takes to collect accounts receivable
4. The time it takes to convert inventory into cash, sell it, and collect the receivables, minus the time it takes to pay suppliers

58. Which of the following is NOT a working capital financing policy?

1. Aggressive
2. Conservative
3. Moderate
4. All of the above are working capital financing policies

59. An aggressive working capital financing policy involves

1. Financing a large portion of permanent working capital with short-term debt
2. Financing a large portion of temporary working capital with short-term debt
3. Financing a large portion of permanent working capital with long-term debt
4. Financing a large portion of temporary working capital with long-term debt

60. A conservative working capital financing policy involves

1. Financing a large portion of permanent working capital with short-term debt
2. Financing a large portion of temporary working capital with short-term debt
3. Financing a large portion of permanent working capital with long-term debt
4. Financing a large portion of temporary working capital with long-term debt