Question 1 (1 point) A firm with a flexible working capital policy sees the fina

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Question 1 (1 point)

A firm with a flexible working capital policy sees the financing of working capital as a permanent financing need.

Question 1 options:

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Question 2 (1 point)

A firm with high carrying costs will likely have a restrictive working capital policy.

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Question 3 (1 point)

A firm has Days in Inventory of 45 days, DSO of 35 days, and Days in Payables of 60 days. It's cash Conversion Cycle is ____ days.

Question 3 options:

70

50

20

80

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Question 4 (1 point)

All of the below are goals of working capital management except:

Question 4 options:

to minimize the firm's WACC

To maintain sufficient liquidity

To minimize the firm's cash conversion cycle

To invest any cash balances safely and in sufficiently liquid form

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Question 5 (1 point)

A firm has a DSO of 62 days, Days in Payables of 49 days, and Days in Inventory of 30 days. It's operating cycle is __________ days.

Question 5 options:

92

111

62

79

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Question 6 (1 point)

For the year 2016, a firm reports the following:

Revenues: 21,000

COGS: 11,500

Average Accounts Receivable: 2,700

Average Inventory: 1,500

Average Payables: 1,850

Assuming a 365 day year it's DSO, DP, DI are ___, ___, ___ (respectively)

Question 6 options:

35,65,48

59,47,32

48,26,59

47,59,48

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Question 7 (1 point)

While there are carrying costs associated with inventory, such as warehousing costs, there are no carrying costs associated with other current assets.

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Question 8 (1 point)

A firm that has recurring, temporary needs for short term financing and a restrictive working capital policy will most likely:

Question 8 options:

issue new stock

establish a revolving line of credit with a bank

issue bonds

reduce the dividend it pays

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Question 9 (1 point)

One strategy a firm might use to help minimize its cash conversion cycle would be to extend longer terms of trade to its customers.

Question 9 options:

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Question 10 (1 point)

Costs associated with stocking out increase as current assets are increased.

Question 10 options:

Explanation / Answer

While there are carrying costs associated with inventory, such as warehousing costs, there are no carrying costs associated with other current assets. True

A firm with a flexible working capital policy sees the financing of working capital as a permanent financing need. True

A firm with high carrying costs will likely have a restrictive working capital policy. False

A firm has Days in Inventory of 45 days, DSO of 35 days, and Days in Payables of 60 days. It's cash Conversion Cycle is ____ days. 20

All of the below are goals of working capital management except: to minimize the firm's WACC

A firm has a DSO of 62 days, Days in Payables of 49 days, and Days in Inventory of 30 days. It's operating cycle is __________ days. 92

Assuming a 365 day year it's DSO, DP, DI are ___, ___, ___ (respectively) 47,59,48

A firm that has recurring, temporary needs for short term financing and a restrictive working capital policy will most likely:

establish a revolving line of credit with a bank

One strategy a firm might use to help minimize its cash conversion cycle would be to extend longer terms of trade to its customers. False

Costs associated with stocking out increase as current assets are increased. False

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