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Jacket
Business Accounting and Finance
Tony Davies, University of Wales, Lampeter, UK
Brian Pain, University of Luton, UK
Management of working capital

Self-test Questions



1

The working capital requirement (WCR) is
A)working capital less short-term debt less cash
B)working capital plus short-term debt plus cash
C)stocks plus debtors less creditors plus prepayments less accruals
D)stocks plus debtors less creditors
2

Working capital is
A)WCR plus short-term debt plus cash
B)equity plus long-term debt less fixed assets
C)WCR less short-term debt less cash
D)equity plus long-term debt plus fixed assets
3

Companies may adopt an aggressive or a conservative working capital policy. An aggressive policy means that a company
A)holds high levels of cash and stocks
B)has a low level of flexibility
C)faces a low level of risk
D)expects a lower level of profitability
4

Questions 4 to 7 refer to the following diagram:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::ch15a::/sites/dl/free/0077098250/66362/ch15a.gif','popWin', 'width=558,height=362,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">ch15a (50.0K)</a>ch15a

Stock turnover days for 2001 are higher/lower than 2000 by
A)+ 25.0%
B)- 25.0%
C)+ 12.5%
D)- 12.5%
5

Average customer settlement days for 2001 are higher/lower than 2000 by
A)- 8.0%
B)+ 10.6%
C)- 10.6%
D)+ 8.0%
6

Average supplier payment days for 2001 are higher/lower than 2000 by
A)+ 33.3%
B)- 40.0%
C)- 33.3%
D)+ 40.0%
7

The operating cycle for 2001 is
A)33 days
B)55 days
C)107 days
D)129 days
8

'A management philosophy that incorporates a 'pull' system of producing or purchasing components and products in response to customer demand' describes
A)materials requirement planning (MRP)
B)optimised production technology (OPT)
C)kanban
D)just in time (JIT)
9

Short-term cash flow improvement may not be achieved by
A)reducing stocks
B)reducing trade creditors
C)increasing trade creditors
D)reducing trade debtors
10

Long-term cash flow improvement may not be achieved by
A)reducing long-term loans
B)increasing equity capital
C)increasing long-term liabilities
D)reducing capital expenditure






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