Finance for Non-Finance Managers Working Capital Management 2

Question 1

What does accounts payable represent on a balance sheet?

Accepted Answer

Money the company owes to suppliers

Answer

Accounts payable is the amount owed to suppliers for goods or services received but not yet paid for.

Question 2

Inventory turnover ratio measures:

Accepted Answer

How many times inventory is sold and replaced in a period

Answer

Inventory turnover = Cost of Goods Sold ÷ Average Inventory, showing how efficiently stock is managed.

Question 3

Which term describes money owed by customers for goods or services already delivered?

Accepted Answer

Accounts receivable

Answer

Accounts receivable represents amounts customers owe the company for completed sales on credit.

Question 4

A high days sales outstanding (DSO) typically indicates:

Accepted Answer

The company is collecting receivables slowly

Answer

High DSO means it takes more days on average to collect payment after a sale, slowing cash flow.

Question 5

Which of the following is a current liability?

Accepted Answer

Accrued wages payable

Answer

Accrued wages payable are employee wages earned but not yet paid, due within the current period.

Finance for Non-Finance Managers Practice Test