Working Capital Management Trivia Quizzes for Practice

61. A moderate working capital financing policy involves

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

62. Which working capital financing policy exposes a company to the greatest risk of liquidity problems?

1. Aggressive
2. Conservative
3. Moderate
4. It depends on the specific circumstances of the company

63. Which working capital financing policy has the lowest risk of liquidity problems?

1. Aggressive
2. Conservative
3. Moderate
4. It depends on the specific circumstances of the company

64. What is the cost of not taking a cash discount?

1. The effective interest rate that a company pays for not taking the discount
2. The discount that the company forgoes by not paying early
3. The cost of lost sales due to tight credit policies
4. The cost of bad debts

65. How is the cost of not taking a cash discount calculated?

1. [(Discount % / (100% - Discount %)) x (365 days / (Credit period - Discount period))]
2. [(Discount % / (100% - Discount %)) x (365 days / (Discount period - Credit period))]
3. [(100% - Discount %) / Discount %] x (365 days / (Credit period - Discount period))
4. [(100% - Discount %) / Discount %] x (365 days / (Discount period - Credit period))

66. If a company is offered a 2/10, net 30 credit term, what is the effective annual cost of not taking the discount?

1. Approximately 36.73%
2. Approximately 18.27%
3. Approximately 9.14%
4. Approximately 4.57%

67. What is a safety stock?

1. The minimum level of inventory that a company must maintain to avoid stockouts
2. The maximum level of inventory that a company can hold
3. The average level of inventory that a company holds
4. The level of inventory that a company orders each time it places an order

68. What is the primary risk associated with excessive working capital?

1. Loss of profitability
2. Inability to meet short-term obligations
3. Increased risk of bankruptcy
4. Decreased market share

69. What factors affect the level of safety stock?

1. Demand uncertainty
2. Lead time variability
3. Service level desired
4. All of the above

70. What is a just-in-time (JIT) inventory system?

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

71. What are the benefits of a JIT inventory system?

1. Reduced inventory costs, improved quality, increased productivity
2. Increased inventory costs, reduced quality, decreased productivity
3. No significant impact on inventory costs, quality, or productivity
4. Increased inventory costs, improved quality, decreased productivity

72. What is a disadvantage of a JIT inventory system?

1. Increased risk of stockouts
2. Decreased risk of stockouts
3. No significant impact on the risk of stockouts
4. Decreased production flexibility

73. What is the primary goal of cash management?

1. To maximize the return on cash
2. To minimize the cost of holding cash
3. To ensure that the company has enough cash to meet its obligations
4. All of the above

74. What is the primary goal of inventory management?

1. To minimize the cost of holding inventory
2. To maximize the availability of inventory
3. To minimize the risk of stockouts
4. All of the above

75. What is the primary goal of accounts receivable management?

1. To maximize sales
2. To minimize the risk of bad debts
3. To collect payments quickly
4. All of the above