Finance for Non-Finance Managers Working Capital Management 1

Question 1

What is working capital defined as?

Accepted Answer

Current assets minus current liabilities

Answer

Total assets minus total liabilities

Answer

Fixed assets minus long-term debt

Answer

Revenue minus operating expenses

Question 2

Which of the following is an example of a current asset?

Accepted Answer

Accounts receivable

Answer

Land

Answer

Equipment

Answer

Long-term investments

Question 3

A company has $500,000 in current assets and $200,000 in current liabilities. What is its working capital?

Accepted Answer

$300,000

Answer

$200,000

Answer

$500,000

Answer

$700,000

Question 4

What does a negative working capital typically indicate?

Accepted Answer

The company may struggle to meet short-term obligations

Answer

The company is highly profitable

Answer

The company has no long-term debt

Answer

The company has excess cash

Question 5

Which of the following strategies helps improve working capital?

Accepted Answer

Speeding up collection of accounts receivable

Answer

Extending payment terms to suppliers

Answer

Increasing inventory levels

Answer

Taking on more long-term debt

Question 6

The cash conversion cycle measures:

Accepted Answer

The time between paying for inventory and collecting cash from sales

Answer

How long it takes to convert investments into fixed assets

Answer

The interest rate on a company's debt

Answer

How quickly a company depreciates assets