CCM CCM Working Capital Management 2

Question 1

Which action would DECREASE a company's Days Payable Outstanding (DPO)?

Accepted Answer

Paying invoices earlier than their due dates

Answer

Paying invoices before their due dates reduces the average time taken to settle supplier obligations, thereby lowering DPO.

Question 2

In accounts receivable management, aging analysis helps a company:

Accepted Answer

Identify overdue customer invoices and collection risks

Answer

Aging analysis categorizes accounts receivable by how long invoices have been outstanding to help identify collection risks and prioritize follow-up.

Question 3

Which inventory management approach minimizes holding costs by ordering frequently in small quantities?

Accepted Answer

Just-In-Time (JIT)

Answer

Just-In-Time inventory management reduces holding costs by receiving goods only as needed for production or sales, minimizing on-hand stock.

Question 4

A company's current ratio is 1.8 and its quick ratio is 0.9. What does this indicate?

Accepted Answer

The company relies heavily on inventory to meet short-term obligations

Answer

A large gap between the current and quick ratios indicates the company holds significant inventory; without it, liquid assets are insufficient to cover current liabilities.

Question 5

The operating cycle of a business measures the time from:

Accepted Answer

Purchasing inventory to collecting cash from customers

Answer

The operating cycle spans from the purchase of inventory through production and sale to the collection of cash from customers.

(CCM) Certified Cash Manager Practice Test

(CCM) Certified Cash Manager Practice Test

CCM CCM Working Capital Management 2