CCM Working Capital Management Flashcards
6 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CCM Working Capital Management flashcards as text
Which action would DECREASE a company's Days Payable Outstanding (DPO)?
Answer: Paying invoices earlier than their due dates
Paying invoices before their due dates reduces the average time taken to settle supplier obligations, thereby lowering DPO.
In accounts receivable management, aging analysis helps a company:
Answer: Identify overdue customer invoices and collection risks
Aging analysis categorizes accounts receivable by how long invoices have been outstanding to help identify collection risks and prioritize follow-up.
Which inventory management approach minimizes holding costs by ordering frequently in small quantities?
Answer: Just-In-Time (JIT)
Just-In-Time inventory management reduces holding costs by receiving goods only as needed for production or sales, minimizing on-hand stock.
A company's current ratio is 1.8 and its quick ratio is 0.9. What does this indicate?
Answer: The company relies heavily on inventory to meet short-term obligations
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.
The operating cycle of a business measures the time from:
Answer: Purchasing inventory to collecting cash from customers
The operating cycle spans from the purchase of inventory through production and sale to the collection of cash from customers.
Dynamic discounting in accounts payable allows buyers to:
Answer: Offer variable discounts to suppliers for early invoice payment
Dynamic discounting lets buyers offer suppliers early payment at a sliding discount rate — the earlier the payment, the greater the discount.