Question 1

A company's cash on hand and the rate that cash is used in operations due to negative operating cash flows is best described as:
A) liquidity.
B) cash burn.
C) productivity.
D) financial leverage.
E) operational efficiency.

Accepted Answer

Cash burn refers to the rate at which a company uses up its cash reserves or cash balance, particularly when it is spending more cash than it is receiving from operations, which is common in startups and companies with negative operating cash flows.

Question 2

How long a company can operate before it has to raise funds, either by issuing stock or borrowing is best described as:
A) liquidity.
B) burn rate.
C) cash burn.
D) financial leverage.
E) operational efficiency.

Accepted Answer

The burn rate is the rate at which a company uses up its cash reserves or capital before it needs to raise additional funds.

Question 3

The sum of a company's current assets is best described as:
A) liquidity.
B) cash burn.
C) total assets.
D) working capital.
E) net working capital.

Accepted Answer

D

Question 4

Current assets minus current liabilities is best described as:
A) liquidity.
B) cash burn.
C) total assets.
D) working capital.
E) net working capital.

Accepted Answer

The answer of Current assets minus current liabilities is best...

Question 5

Which of the following is the correct formula to determine cash?
A) Beginning cash balance + collections from customers - payments to suppliers = ending cash balance
B) Beginning cash balance - collections from customers + payments to suppliers = ending cash balance
C) Beginning cash balance + collections from customers + payments to suppliers = ending cash balance
D) Beginning cash balance - collections from customers - payments to suppliers = ending cash balance

Accepted Answer

The correct formula to determine cash is: Beginning cash balance + collections from customers - payments to suppliers = ending cash balance. This formula accurately reflects how cash increases with collections and decreases with payments.

Question 6

The ending cash balance for a company with the following financial information:
 is closest to:
A) $0
B) $250
C) $300
D) $325
E) $550

Accepted Answer

The answer of The ending cash balance for a company...

Question 7

The terms under which a company grants credit to its customers is best described as:
A) credit policy.
B) liquidity policy.
C) payment policy.
D) inventory policy.

Accepted Answer

A credit policy outlines the criteria a company uses to decide who qualifies for credit, the terms of credit, and how late payments are handled, making it the correct choice for how a company grants credit to its customers.

Question 8

How quickly a company pays off the credit it receives from other companies is best described as:
A) credit policy.
B) liquidity policy.
C) payment policy.
D) inventory policy.

Accepted Answer

Payment policy best describes how quickly a company pays off the credit it receives from other companies, as it directly relates to the terms and practices a company follows to manage its outgoing payments to suppliers or creditors.

Question 9

Determining whether to use EOQ, MRP or JIT is part of what type of policy?
A) Credit policy
B) Liquidity policy
C) Payment policy
D) Inventory policy

Accepted Answer

The answer of Determining whether to use EOQ, MRP or...

Question 10

Which of the following is the correct current ratio calculation?
A) Current assets / Current liabilities
B) Current assets - Current liabilities
C) Current liabilities - Current assets
D) Current liabilities / Current assets

Accepted Answer

The correct calculation for the current ratio is current assets divided by current liabilities, which is option A.

Question 11

Which of the following is the correct quick ratio calculation?
A) Current assets / Current liabilities
B) (Cash + Accounts receivable) / Current liabilities
C) (Cash + Marketable securities) / Current liabilities
D) (Cash + Marketable securities + Accounts receivable) / Current liabilities

Accepted Answer

The quick ratio is calculated as (Cash + Marketable securities + Accounts receivable) / Current liabilities, which measures a company's ability to meet its short-term obligations with its most liquid assets.

Question 12

Which of the following is the correct accounts receivable turnover calculation?
A) Revenues / Accounts receivable
B) Accounts receivable /Revenues
C) Accounts receivable / Current liabilities
D) Accounts receivable / Average daily sales
E) (Cash + Marketable securities + Accounts receivable) / Current liabilities

Accepted Answer

The accounts receivable turnover calculation is correctly represented by dividing revenues by accounts receivable, which measures how many times a company can turn its accounts receivable into cash within a period.

Question 13

Which of the following is the correct days sales outstanding calculation?
A) Revenues / Accounts receivable
B) Accounts receivable/ Revenues
C) Average daily sales/ Accounts receivable
D) Accounts receivable/Average daily sales

Accepted Answer

Days Sales Outstanding (DSO) is calculated by dividing the accounts receivable by the average daily sales. This measures the average number of days it takes a company to collect payment after a sale has been made.

Question 14

Which of the following is the correct inventory turnover calculation?
A) Inventory / Cost of goods sold
B) Cost of goods sold /Inventory
C) Inventory / Average days cost of goods sold
D) Average days cost of goods sold / Inventory

Accepted Answer

The correct calculation for inventory turnover is Cost of Goods Sold divided by Inventory. This measures how many times a company's inventory is sold and replaced over a period.

Question 15

Which of the following is the correct days sales in inventory calculation?
A) 365 / Inventory turnover
B) Inventory turnover / 365
C) Inventory / Cost of goods sold
D) Cost of goods sold /Inventory

Accepted Answer

Days sales in inventory is calculated as 365 divided by the inventory turnover ratio, which is option A.

Question 16

Which of the following is the correct accounts payable turnover calculation?
A) Inventory Turnover / 365
B) Inventory / Accounts Payable
C) Purchases / Accounts Payable
D) Accounts Payable /Purchases
E) Accounts Payable / Average Days' Purchases

Accepted Answer

The correct formula for accounts payable turnover is Purchases divided by Accounts Payable. This ratio measures how quickly a company pays off its suppliers.

Question 17

The average time it takes a company to acquire inventory, sell it, and collect the sale proceeds is best described as:
A) liquidity.
B) cash burn.
C) operating cycle.
D) cash conversion cycle.
E) days sales outstanding.

Accepted Answer

The operating cycle refers to the average time it takes for a company to acquire inventory, sell it, and collect the sale proceeds.

Question 18

The measure of the average time between when a company pays cash for its inventory purchases and when it receives cash for its sales is best described as the:
A) liquidity.
B) cash burn.
C) operating cycle.
D) cash conversion cycle.
E) days sales outstanding.

Accepted Answer

The cash conversion cycle measures the average time between outlaying cash for inventory and receiving cash from sales, reflecting the efficiency of a company's cash flow management.

Question 19

Using the following financial statements,
  the quick ratio is closest to:
A) 0.28
B) 0.68
C) 1.36
D) 2.56

Accepted Answer

The answer of Using the following financial statements,
  the...

Question 20

Using the following financial statements
 the current ratio is closest to:
A) 0.29
B) 2.56
C) 3.20

Accepted Answer

The answer of Using the following financial statements
 the current...

Quiz 19: Working Capital Management

A company's cash on hand and the rate that cash is used in operations due to negative operating cash flows is best described as:

How long a company can operate before it has to raise funds, either by issuing stock or borrowing is best described as:

The sum of a company's current assets is best described as:

Current assets minus current liabilities is best described as:

Which of the following is the correct formula to determine cash?

The ending cash balance for a company with the following financial information: is closest to:

The terms under which a company grants credit to its customers is best described as:

How quickly a company pays off the credit it receives from other companies is best described as:

Determining whether to use EOQ, MRP or JIT is part of what type of policy?

Which of the following is the correct current ratio calculation?

Which of the following is the correct quick ratio calculation?

Which of the following is the correct accounts receivable turnover calculation?

Which of the following is the correct days sales outstanding calculation?

Which of the following is the correct inventory turnover calculation?

Which of the following is the correct days sales in inventory calculation?

Which of the following is the correct accounts payable turnover calculation?

The average time it takes a company to acquire inventory, sell it, and collect the sale proceeds is best described as:

The measure of the average time between when a company pays cash for its inventory purchases and when it receives cash for its sales is best described as the:

Using the following financial statements, the quick ratio is closest to:

Using the following financial statements the current ratio is closest to: