41.
What is the current ratio?
A
Total liabilities / Total assets
B
Current assets / Current liabilities
C
Current liabilities / Current assets
D
Total assets / Total liabilities
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What is the current ratio?
Total liabilities / Total assets
Current assets / Current liabilities
Current liabilities / Current assets
Total assets / Total liabilities
How does the matching principle relate to working capital management?
It guides the determination of credit terms
It guides the financing of temporary working capital with short-term sources of funds
It guides the financing of permanent working capital with long-term sources of funds
It guides the valuation of inventory
What is the difference between gross working capital and net working capital?
Gross working capital is the total value of current assets, while net working capital is the total value of current liabilities.
Gross working capital includes all current assets, while net working capital excludes current liabilities.
Gross working capital is the same as net working capital.
Gross working capital is the difference between current assets and current liabilities, while net working capital is the sum of current assets and current liabilities.
What is the matching principle?
Matching long-term assets with long-term liabilities
Matching revenues with the expenses incurred to generate those revenues
Matching assets with liabilities
Matching current assets with current liabilities
What is the temporary working capital?
The working capital that is financed with equity
The minimum level of working capital that a company needs to operate
The working capital that fluctuates with the level of sales
The working capital that is financed with long-term debt
What is the permanent working capital?
The working capital that is financed with equity
The minimum level of working capital that a company needs to operate
The working capital that fluctuates with the level of sales
The working capital that is financed with long-term debt
What is the primary goal of working capital financing?
All of the above
To minimize the cost of financing
To maximize the availability of funds
To minimize the risk of insolvency
What is the primary goal of accounts receivable management?
To maximize sales
To minimize the risk of bad debts
To collect payments quickly
All of the above
What is the primary goal of inventory management?
To minimize the cost of holding inventory
To maximize the availability of inventory
To minimize the risk of stockouts
All of the above
What is the primary goal of cash management?
To maximize the return on cash
To minimize the cost of holding cash
To ensure that the company has enough cash to meet its obligations
All of the above
What is the Miller-Orr model?
A model that determines the optimal cash balance range
A model that determines the optimal credit terms
A model that determines the optimal inventory level
A model that determines the optimal level of production
What is the Baumol model?
A model that determines the optimal amount of cash to hold
A model that determines the optimal credit terms
A model that determines the optimal inventory level
A model that determines the optimal level of production
What is the opportunity cost of holding cash?
The return that could be earned on cash if it were invested
The cost of borrowing money to cover cash shortages
The cost of lost sales due to insufficient cash
The cost of bank fees
What is the primary goal of working capital management?
Maximize profitability
Minimize risk
Optimize liquidity and profitability
Maximize market share
What is the cash discount?
A discount offered to customers who pay their bills early
A discount offered to suppliers who sell on credit
A discount offered to investors who buy stock
A discount offered to employees who work overtime
What is the cost of trade credit?
The interest rate that a company pays for using trade credit
The discount that a company receives for paying early
The cost of lost sales due to tight credit policies
The cost of bad debts
What is trade credit?
Credit extended by suppliers to their customers
Credit extended by banks to their customers
Credit extended by investors to corporations
Credit extended by governments to businesses
What is factoring?
The process of selling accounts receivable to a third party at a discount
The process of borrowing money from a bank
The process of issuing commercial paper
The process of leasing equipment
What is a commercial paper?
Short-term unsecured promissory notes issued by corporations
Short-term secured promissory notes issued by corporations
Long-term unsecured promissory notes issued by corporations
Long-term secured promissory notes issued by corporations
What is a line of credit?
A prearranged borrowing agreement with a bank
A loan that is secured by collateral
A loan that is unsecured
A loan that is used to finance the purchase of inventory