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

Working capital management aims to balance liquidity needs with efficiency by minimizing idle cash while ensuring all short-term obligations can be met.

Question 2

The cash conversion cycle (CCC) is calculated as:

Accepted Answer

DSO + DIO - DPO

Answer

The cash conversion cycle equals Days Sales Outstanding plus Days Inventory Outstanding minus Days Payable Outstanding, measuring how long cash is tied up in operations.

Question 3

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

Accepted Answer

Days Sales Outstanding (DSO)

Answer

Days Sales Outstanding (DSO) measures the average number of days a company takes to collect payment after making a sale.

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

Extending supplier payment terms increases Days Payable Outstanding, which reduces the cash conversion cycle and frees up working capital.

Question 5

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

Accepted Answer

Revolving credit facility

Answer

A revolving credit facility provides flexible short-term borrowing capacity that can be drawn and repaid repeatedly to fund temporary working capital needs.

(CCM) Certified Cash Manager Practice Test

(CCM) Certified Cash Manager Practice Test

CCM CCM Working Capital Management