Certified Treasury Professional Working Capital Management Questions and Answers

Question 1

A company has a Days Inventory Outstanding (DIO) of 45 days, a Days Sales Outstanding (DSO) of 35 days, and a Days Payables Outstanding (DPO) of 40 days.
What is the company's Cash Conversion Cycle (CCC)?

Accepted Answer

40 days

Answer

120 days

Answer

80 days

Answer

50 days

Question 2

Which of the following describes an aggressive working capital financing policy?

Accepted Answer

Financing a portion of permanent current assets with short-term, lower-cost liabilities.

Answer

Financing all assets with long-term debt and equity.

Answer

Using long-term sources to finance fixed assets and permanent current assets, and short-term sources for fluctuating current assets.

Answer

Maintaining high levels of cash and marketable securities to ensure liquidity.

Question 3

A treasury manager at a manufacturing firm is tasked with optimizing working capital. The company has been experiencing lengthening cash conversion cycles. Which of the following actions would be MOST effective in shortening the cash conversion cycle?

Accepted Answer

Negotiating with suppliers to extend payment terms from 45 to 60 days.

Answer

Increasing the credit period offered to customers from 30 to 60 days.

Answer

Increasing the level of raw material inventory to avoid production stockouts.

Answer

Paying all supplier invoices immediately upon receipt to capture early payment discounts.

Question 4

All of the following are primary objectives of accounts receivable management EXCEPT:

Accepted Answer

Maximizing the days sales outstanding (DSO).

Answer

Converting receivables into cash as quickly as possible.

Answer

Establishing and enforcing clear credit policies.

Answer

Optimizing the company's cash flow and liquidity.

Question 5

A company is considering implementing a new inventory management system. Which system is designed to minimize inventory holding costs by receiving goods only as they are needed in the production process?

Accepted Answer

Just-in-Time (JIT)

Answer

Materials Requirements Planning (MRP)

Answer

Economic Order Quantity (EOQ)

Answer

ABC Analysis

Question 6

Which of the following is a key strategy for optimizing a company's accounts payable process to improve working capital?

Accepted Answer

Automating the invoice processing and payment systems.

Answer

Paying all invoices as soon as they are received to maintain good supplier relationships.

Answer

Forgoing all early payment discounts to keep cash in the company longer.

Answer

Using only paper checks for all supplier payments for better control.