TRB PG Assistant - Working capital management - working capital forecast, cash management, receivable management, inventory management, capital budgeting One Line Questions & Answers

1. The 'reorder point' in inventory management is the inventory level at which: — A new order should be placed to avoid stockouts

2. Which of the following is NOT a component of working capital? — Fixed Assets

3. Which of the following is a tool for cash flow forecasting? — Cash Budget

4. Which aspect of working capital management directly impacts a firm's ability to meet its immediate obligations? — Cash management

5. A firm that aims to minimize its working capital is pursuing a(n) ______ working capital policy. — Aggressive

6. Which of the following costs are considered in the EOQ model? — Ordering costs and holding costs

7. Which credit policy component involves setting standards for the creditworthiness of customers? — Credit standards

8. A firm's working capital forecast is most useful for: — Predicting future short-term financing needs

9. Which of the following is a qualitative factor considered in receivables management? — Customer creditworthiness

10. A high Days Sales Outstanding (DSO) generally indicates: — Slow collection of receivables

11. Sensitivity analysis in working capital management helps to: — Identify how changes in key variables affect outcomes

12. Concentration banking involves: — Establishing multiple collection points to reduce mail and processing delays

13. The primary risk associated with aggressive working capital management is: — Insufficient liquidity to meet short-term obligations

14. Which of the following is a common source of uncertainty in cash flow forecasts? — Changes in economic conditions

15. A liberal credit policy typically leads to: — Higher sales and higher bad debt losses

16. Which capital budgeting approach focuses on the incremental cash flows generated by a project? — Incremental Cash Flow Analysis

17. A company with a high inventory turnover ratio is generally considered to be: — Selling its inventory efficiently

18. The Net Present Value (NPV) method: — Calculates the present value of future cash flows minus the initial investment

19. The Profitability Index (PI) is calculated as: — Present Value of Future Cash Flows / Initial Investment

20. Offering a discount for early payment is an example of managing: — Receivables collection

21. A stockout occurs when: — There is insufficient inventory to meet demand

22. Which ratio is commonly used to assess the efficiency of receivables collection? — Days Sales Outstanding (DSO)

23. Which of the following is a short-term financing source for working capital needs? — Commercial paper

24. Which cash management technique aims to speed up the inflow of cash from customers? — Lockbox system

25. Just-In-Time (JIT) inventory management aims to: — Receive inventory only as it is needed for production or sale

26. Capital budgeting is the process of: — Making decisions about long-term investments in fixed assets

27. The primary objective of receivables management is to: — Minimize bad debt losses and the investment in accounts receivable

28. Which capital budgeting technique is criticized for ignoring the time value of money and cash flows beyond the payback period? — Payback Period

29. Which capital budgeting technique provides a measure of profitability per dollar invested? — Profitability Index (PI)

30. Which of the following is a cost associated with holding inventory? — Storage and insurance costs

31. Which capital budgeting technique considers the time value of money? — Net Present Value (NPV)

32. The cost of capital is used as the discount rate in which capital budgeting method? — Net Present Value (NPV)

33. A firm's ability to convert its current assets into cash quickly is known as: — Liquidity

34. Which of the following is a key output of a working capital forecast? — Projected cash surpluses or deficits

35. The operating cycle is defined as the time from: — Purchase of raw materials to collection of cash from sales

36. A lockbox system is primarily used to: — Speed up the collection of accounts receivable

37. A Profitability Index (PI) greater than 1 suggests that the project: — Is expected to generate positive NPV

38. The term 'float' in cash management refers to: — The time lag between when a payment is made and when the cash is actually withdrawn from the bank

39. The 'credit limit' in receivables management refers to: — The maximum amount of credit a customer can receive

40. The 'credit period' refers to: — The length of time a customer has to pay their bill

41. The Internal Rate of Return (IRR) is the discount rate at which: — The NPV equals zero

42. The Economic Order Quantity (EOQ) model is used to determine: — The optimal order quantity that minimizes total inventory costs

43. The cash conversion cycle (CCC) measures: — The time from paying for inventory to collecting cash from sales

44. The Payback Period method calculates: — The time required for a project's cumulative cash inflows to equal its initial cost

45. Which of the following is a characteristic of capital budgeting decisions? — They have a significant impact on the firm's future profitability and risk

46. Which of the following is a key objective of inventory management? — To minimize inventory holding costs and stockout costs

47. What is the primary goal of working capital management? — To ensure the firm has sufficient liquidity to meet its short-term obligations and operational needs

48. A positive NPV generally indicates that the project is: — Expected to generate returns exceeding the required rate of return

49. Which of the following is a common method for managing disbursements to slow down cash outflows? — Implementing a zero-balance account system

50. Which inventory valuation method assumes that the first units purchased are the first units sold? — First-In, First-Out (FIFO)

Working capital management - working capital forecast, cash management, receivable management, inventory management, capital budgeting - One Line Questions