CCM CCM Working Capital Management

Question 1

What is the primary goal of working capital management?

Accepted Answer

Ensure sufficient liquidity while minimizing idle cash

Answer

Maximize long-term capital investment

Answer

Reduce the company's tax liability

Answer

Increase shareholder equity

Question 2

The cash conversion cycle (CCC) is calculated as:

Accepted Answer

DSO + DIO - DPO

Answer

DSO + DIO + DPO

Answer

DSO - DIO - DPO

Answer

DIO - DSO + DPO

Question 3

Which metric measures how quickly a company collects payments from customers?

Accepted Answer

Days Sales Outstanding (DSO)

Answer

Days Payable Outstanding (DPO)

Answer

Days Inventory Outstanding (DIO)

Answer

Current Ratio

Question 4

A company wants to improve its working capital position. Which action would be MOST effective?

Accepted Answer

Extend payment terms to suppliers

Answer

Increase inventory safety stock

Answer

Offer extended payment terms to customers

Answer

Increase capital expenditures

Question 5

Which of the following is a common short-term working capital financing strategy?

Accepted Answer

Revolving credit facility

Answer

Issuing long-term bonds

Answer

Equity financing through IPO

Answer

Capital lease agreements

Question 6

Net working capital is defined as:

Accepted Answer

Current assets minus current liabilities

Answer

Total assets minus total liabilities

Answer

Fixed assets minus long-term debt

Answer

Cash and equivalents minus short-term debt