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
What is the primary goal of working capital management?
Answer: Ensure sufficient liquidity while minimizing idle cash
Working capital management aims to balance liquidity needs with efficiency by minimizing idle cash while ensuring all short-term obligations can be met.
The cash conversion cycle (CCC) is calculated as:
Answer: DSO + DIO - DPO
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.
Which metric measures how quickly a company collects payments from customers?
Answer: Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) measures the average number of days a company takes to collect payment after making a sale.
A company wants to improve its working capital position. Which action would be MOST effective?
Answer: Extend payment terms to suppliers
Extending supplier payment terms increases Days Payable Outstanding, which reduces the cash conversion cycle and frees up working capital.
Which of the following is a common short-term working capital financing strategy?
Answer: Revolving credit facility
A revolving credit facility provides flexible short-term borrowing capacity that can be drawn and repaid repeatedly to fund temporary working capital needs.
Net working capital is defined as:
Answer: Current assets minus current liabilities
Net working capital equals Current Assets minus Current Liabilities, representing the short-term liquidity buffer of a business.