77 practice sets · Page 2 of 4
An aggressive working capital financing policy involves
Financing a large portion of permanent working capital with short-term debt
Financing a large portion of temporary working capital with short-term debt
Financing a large portion of permanent working capital with long-term debt
Financing a large portion of temporary working capital with long-term debt
Which of the following is NOT a working capital financing policy?
Aggressive
Conservative
Moderate
All of the above are working capital financing policies
What does the cash conversion cycle measure?
The length of time it takes a company to convert its investments in inventory and accounts receivable into cash
The length of time it takes a company to pay its suppliers
The length of time it takes a company to collect its accounts receivable
The length of time it takes a company to sell its inventory
What is the cash conversion cycle?
Days' sales in inventory + Days' sales outstanding - Days' payables outstanding
Days' sales in inventory - Days' sales outstanding + Days' payables outstanding
Days' sales outstanding - Days' sales in inventory + Days' payables outstanding
Days' payables outstanding - Days' sales in inventory - Days' sales outstanding
What does the DPO measure?
The average number of days it takes a company to pay its suppliers
The average number of days it takes a company to collect its accounts receivable
The average number of days it takes a company to sell its inventory
The average number of days it takes a company to produce a product
What is the days' payables outstanding (DPO)?
365 days / Accounts payable turnover ratio
365 days x Accounts payable turnover ratio
Accounts payable / Cost of goods sold
Cost of goods sold / Accounts payable
What does the accounts payable turnover ratio measure?
How efficiently a company pays its suppliers
How quickly a company sells its inventory
How much credit a company extends to its customers
How much credit a company receives from its suppliers
What is the accounts payable turnover ratio?
Cost of goods sold / Average accounts payable
Average accounts payable / Cost of goods sold
Cost of goods sold / Total liabilities
Total liabilities / Cost of goods sold
What does the DSO measure?
The average number of days it takes a company to collect its accounts receivable
The average number of days it takes a company to sell its inventory
The average number of days it takes a company to pay its accounts payable
The average number of days it takes a company to produce a product
What is the days' sales outstanding (DSO)?
365 days / Accounts receivable turnover ratio
365 days x Accounts receivable turnover ratio
Accounts receivable / Net credit sales
Net credit sales / Accounts receivable
What does the accounts receivable turnover ratio measure?
How efficiently a company collects its accounts receivable
How quickly a company sells its inventory
How much credit a company extends to its customers
How much credit a company receives from its suppliers
What is the operating cycle?
The time it takes to convert inventory into cash
The time it takes to pay off long-term debt
The time it takes to collect accounts receivable
The time it takes to produce and sell a product
What is the accounts receivable turnover ratio?
Total assets / Net credit sales
Net credit sales / Average accounts receivable
Average accounts receivable / Net credit sales
Net credit sales / Total assets
What does the days' sales in inventory measure?
The average number of days it takes a company to produce a product
The average number of days it takes a company to sell its inventory
The average number of days it takes a company to collect its accounts receivable
The average number of days it takes a company to pay its accounts payable
What is the days' sales in inventory?
Cost of goods sold / Inventory
365 days / Inventory turnover ratio
365 days x Inventory turnover ratio
Inventory / Cost of goods sold
What does the inventory turnover ratio measure?
How much inventory a company needs to meet demand
How efficiently a company manages its inventory
How quickly a company sells its inventory
How much inventory a company has on hand
What is the inventory turnover ratio?
Average inventory / Sales
Cost of goods sold / Average inventory
Sales / Average inventory
Average inventory / Cost of goods sold
What does the quick ratio measure?
A company's solvency
A company's ability to meet its short-term obligations without relying on the sale of inventory
A company's profitability
A company's liquidity
What is the quick ratio (acid-test ratio)?
(Current liabilities - Current assets) / Current liabilities
(Current assets - Inventory) / Current liabilities
(Current assets - Accounts receivable) / Current liabilities
(Current assets - Cash) / Current liabilities
What does the current ratio measure?
A company's solvency
A company's ability to meet its short-term obligations
A company's profitability
A company's liquidity
