CFC Working Capital Management

Question 1

What does the Cash Conversion Cycle (CCC) measure?

Accepted Answer

The number of days from purchasing inventory to collecting cash from sales, net of payables timing

Answer

The time it takes to collect cash from customers only

Answer

The period between paying suppliers and receiving inventory

Answer

The average collection period for accounts receivable

Question 2

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

Accepted Answer

Days Sales Outstanding (DSO)

Answer

Days Inventory Outstanding (DIO)

Answer

Days Payable Outstanding (DPO)

Answer

Current Ratio

Question 3

A company has current assets of $500,000 and current liabilities of $250,000. What is the current ratio?

Accepted Answer

2.0

Answer

0.5

Answer

1.5

Answer

2.5

Question 4

Which working capital component represents amounts owed to suppliers for goods or services already received?

Accepted Answer

Accounts Payable

Answer

Accounts Receivable

Answer

Inventory

Answer

Short-term Notes Payable

Question 5

What does a negative net working capital position indicate?

Accepted Answer

Current liabilities exceed current assets

Answer

The company is always financially distressed

Answer

The company carries excessive inventory

Answer

The company has too many accounts receivable outstanding

Question 6

Which of the following is excluded from the quick ratio (acid-test ratio) calculation?

Accepted Answer

Inventory

Answer

Cash and cash equivalents

Answer

Marketable securities

Answer

Accounts receivable

Question 7

What is the primary goal of working capital management?

Accepted Answer

Ensure adequate liquidity while optimizing operational efficiency

Answer

Maximize long-term capital expenditures

Answer

Minimize all use of short-term debt financing

Answer

Increase the company's total equity base