Working Capital Management

Working capital refers to: Long-term assets. Short-term assets – short-term liabilities. Total assets. Fixed liabilities.

Permanent working capital is: Seasonal requirement. Minimum level of working capital always maintained. Borrowed funds. None.

Operating cycle includes: Only Inventory Period. Inventory + Receivables − Payables. Only Receivable Period. Payables only.

A shorter operating cycle means: More liquidity. Less liquidity. No effect. Increase in cost.

Cash Conversion Cycle focuses on: Profitability. Cash tied in operations. Sales growth. Fixed assets.

High inventory days indicate: Efficient management. Slow inventory movement. High liquidity. None.

Receivable days measure: Time to convert raw materials. Time customers take to pay. Time suppliers allow. None.

Net Working Capital increases when: Current assets rise. Current liabilities rise. Fixed assets rise. Inventory falls.

A firm with negative working capital is: Always healthy. Always unhealthy. Possibly facing liquidity issues. Guaranteed profitable.

Payable days represent: Credit period offered to customers. Credit period received from suppliers. Cash balance days. None.

Goal of working capital management is: Reduce profitability. Increase risk. Maintain liquidity & efficiency. Maximize profits only.

Gross working capital means: Current liabilities. Current assets. Fixed assets. Total liabilities.

If Cash Conversion Cycle decreases, it indicates: More cash tied up. Better efficiency. Higher operating cycle. Lower liquidity.

Safety stock is part of: Permanent working capital. Temporary working capital. Both. Neither.

Mismatch in cash flows leads to: High profit. Liquidity problems. Higher dividends. None.

Inventory conversion period means: Time to sell inventory. Time to receive payment. Time suppliers allow credit. None.

Working capital cycle helps determine: Capital structure. Profit margin. Cash needed for operations. Market value.

Higher receivable days indicate: Fast collection. Slow collection. High liquidity. None.

Working capital financing includes: Overdraft. Long-term bonds. Equity capital. Debentures.