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Working Capital Management
solved mcqs
1 of 6 sets
1. What are the aspects of working capital
management?
a. inventory management

B. receivable management

c. cash management

d. all of the above

Discussion
d. all of the above
2. _________ function includes a firm’s attempts to
balance cash inflows andoutflows.
a. finance

B. liquidity

c. investment

d. dividend

Discussion
b. liquidity
3. Firms which are capital intensive rely on
_________.
a. equity

B. short term debt

c. debt

d. retained earnings

Discussion
c. debt
4. Hirer is entitled to claim ___________.
a. depreciation

B. salvage value

c. hp payments

d. none of above

Discussion
a. depreciation
5. Which of the following is not an advantages of
trade credit?
a. easy availability

B. flexibility

c. informality

d. buyout financing

Discussion
d. buyout financing
6. Which of the following are theories for dividend
relevance?
a. walter’s model

B. mm approach

c. game theory

d. market value theory

Discussion
a. walter’s model
7. What is not a form of dividend?
a. cash dividends

B. bonus shares(stock dividend)

c. share split

d. split reverse

Discussion
d. split reverse
8. The percentage of earnings paid as dividends is
called __________.
a. dividend policy

B. payout ration

c. cash dividends

d. reverse split

Discussion
b. payout ration
9. What are the various methods of estimating
cash?
a. receipts and payment method

B. adjusted profit & loss method

c. balance sheet method

d. all of the above

Discussion
d. all of the above
10. The art of managing, within the acceptable
level of risk, the consolidatedfunds optimally and
profitably is called _________.
a. integrated treasury

B. treasury management

c. merchant banking

d. none of the above

Discussion
b. treasury management
11. What are the different types of underlying
assets?
a. stocks

B. bonds

c. currency

d. stock indices

Discussion
d. stock indices
12. What are people who buy or sell in the market
to make profits called?
a. hedgers

B. speculators

c. arbitrageurs

d. none of the above

Discussion
b. speculators
13. Which of the following is a technique that helps
the exporter to sell thereceivables to any bank or
financial institution without recourse?
a. forfeiting

B. leading & lagging

c. derivatives

d. netting

Discussion
a. forfeiting
14. Money market financial services not include:
a. bill discounting

B. merchant banking

c. leasing

d. securitisation

Discussion
b. merchant banking
15. Factoring involves:
a. providing short term loan

B. providing long term loan

c. financing of export receivables

d. management of receivables of borrower

Discussion
d. management of receivables of borrower
16. The tools of treasury management does not
include:
a. foreign exchange management

B. cash management

c. receivable management

d. risk management

Discussion
d. risk management
17. Under which type of bank borrowing can a
borrower obtain credit from abank against its
bills?
a. letter of credit

B. cash

c. purchase or discounting of bills

d. working capital loan

Discussion
c. purchase or discounting of bills
18. The factors that affect dividend policy are:
a. tax consideration

B. privatisation

c. foreign investment

d. working cash flow

Discussion
a. tax consideration
19. To financial analysts, "working capital" means
the same thing as __________.
a. total assets

B. fixed assets

c. current assets

d. current assets minus current liabilities.

Discussion
c. current assets
20. Which of the following would be consistent
with an aggressive approach tofinancing working
capital?
a. financing short-term needs with short-term funds.

B. financing permanent inventory buildup with long-term debt.

c. financing seasonal needs with short-term funds.

d. financing some long-term needs with short-term funds.

Discussion
d. financing some long-term needs with short-term funds.
21. Which of the following would be consistent
with a conservative approach tofinancing working
capital?
a. financing short-term needs with short-term funds.

B. financing short-term needs with long-term debt.

c. financing seasonal needs with short-term funds.

d. financing some long-term needs with short-term funds.

Discussion
b. financing short-term needs with long-term debt.
22. -Which of the following would be consistent
with a hedging (maturity matching)approach to
financing working capital?
a. financing short-term needs with short-term funds.

B. financing short-term needs with long-term debt.

c. financing seasonal needs with long-term funds.

d. financing some long-term needs with short-term funds.

Discussion
a. financing short-term needs with short-term funds.
23. Which of the following statements is most
correct?
a. for small companies, long-term debt is the principal source of external
financing.

B. current assets of the typical manufacturing firm account for over half of
its total assets.

c. strict adherence to the maturity matching approach to financing would

call for all current assets to be financed solely with current liabilities.

d. similar to the capital structure management, working capital

management requires the financial manager to make a decision and not
address the issue again for several months

Discussion
b. current assets of the typical manufacturing firm account for over half of
its total assets.
24. The amount of current assets that varies with
seasonal requirements isreferred to as __________
working capital.
a. permanent

B. net

c. temporary

d. gross

Discussion
c. temporary
25. Having defined working capital as current
assets, it can be further classifiedaccording to
__________.
a. financing method and time

B. rate of return and financing method

c. time and rate of return

d. components and time

Discussion
d. components and time

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