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Working Capital Management
solved mcqs
5 of 6 sets
101. Cash Discount term 3/15, net 40 means
a. 3% discount if payment in 15 days, otherwise full payment in 40 days,

B. 15% discount if payment in 3 days, otherwise full payment 40 days,

c. 3% interest if payment made in 40 days and 15%,interest thereafter,

d. none of the above.

Discussion
a. 3% discount if payment in 15 days, otherwise full payment in 40 days,
102. If the sales of the firm are . 60,00,000 and the
average debtors are . 15,00,000 then the receivables
turnover is
a. 4 times,

B. 25%,

c. 400%,

d. 0.25 times

Discussion
a. 4 times,
103. If cash discount is offered to customers, then
which of the following wouldincrease?
a. sales

B. debtors,

c. debt collection period,

d. all of the above

Discussion
a. sales
104. Receivables Management deals with
a. receipts of raw materials,

B. debtors collection,

c. creditors management,

d. inventory management

Discussion
b. debtors collection,
105. Which of the following is related to
Receivables Management?
a. cash budget,

B. economic order quantity,

c. ageing schedule,

d. all of the above.

Discussion
c. ageing schedule,
106. EOQ is the quantity that minimizes
a. total ordering cost,

B. total inventory cost,

c. total interest cost,

d. safety stock level.

Discussion
a. total ordering cost,
107. ABC Analysis is used in
a. inventory management

B. receivables management

c. accounting policies,

d. corporate governance.

Discussion
a. inventory management
108. If no information is available, the General
Rule for valuation of stock forbalance sheet is
a. replacement cost,

B. realizable value,

c. historical cost,

d. standard cost.

Discussion
c. historical cost,
109. In ABC inventory management system, class
A items may require
a. higher safety stock

B. frequent deliveries

c. periodic inventory system

d. updating of inventory records.

Discussion
a. higher safety stock
110. Inventory holding cost may include
a. material purchase cost,

B. penalty charge for default,

c. interest on loan,

d. none of the above.

Discussion
d. none of the above.
111. Use of safety stock by a firm would
a. increase inventory cost

B. decrease inventory cost,

c. no effect on cost

d. none of the above.

Discussion
a. increase inventory cost
112. Which of the following is true for a company
which uses continuous reviewinventory system
a. order interval is fixed,

B. order interval varies,

c. order quantity is fixed,

d. both (a) and (c).

Discussion
b. order interval varies,
113. EOQ determines the order size when
a. total order cost is minimum

B. total number of order is least,

c. total inventory costs are minimum,

d. none of the above.

Discussion
c. total inventory costs are minimum,
114. ABC Analysis is useful for analyzing the
inventories:
a. based on their quality,

B. based on their usage and value,

c. based on physical volume,

d. all of the above.

Discussion
b. based on their usage and value,
115. If A = Annual Requirement, O = Order Cost
and C = Carrying Cost per unitper annum, then
EOQ
a. (2ao/c) 2 ,

B. 2ao/c

c. 2a÷oc,

d. 2aoc.

Discussion
b. 2ao/c
116. Inventory is generally valued as lower of
a. market price and replacement cost

B. cost and net realizable value

c. cost and sales value,

d. sales value and profit.

Discussion
b. cost and net realizable value
117. Which of the following is not included in cost
of inventory?
a. purchase cost

B. transport in cost,

c. import duty,

d. selling costs.

Discussion
d. selling costs.
118. Cost of not carrying sufficient inventory is
known as
a. carrying cost,

B. holding cost,

c. total cost

d. stock-out cost

Discussion
d. stock-out cost
119. Which of the following is not a benefit of
carrying inventories
a. reduction in ordering cost,

B. avoiding lost sales,

c. reducing carrying cost,

d. avoiding production shortages.

Discussion
c. reducing carrying cost,
120. Which of the following is not a standard
method of inventory valuation?
a. first in first out

B. standard cost,

c. average pricing,

d. realizable value.

Discussion
c. average pricing,
121. System of procuring goods when required, is
known as,
a. free on board (fob),

B. always butter control (abc),

c. jest in time (jit)

d. economic order quantity.

Discussion
c. jest in time (jit)
122. What is Economic Order Quantity?
a. cost of an order,

B. cost of stock

c. reorder level,

d. optimum order size.

Discussion
d. optimum order size.
123. The type of collateral (security) used for short-
term loan is
a. real estate,

B. plant & machinery,

c. stock of good,

d. equity share capital

Discussion
c. stock of good,
124. Which of the following is a liability of a bank?
a. treasury bills,

B. commercial papers,

c. certificate of deposits,

d. junk bonds.

Discussion
c. certificate of deposits,
125. Commercial paper is a type of
a. fixed coupon bond

B. unsecured short-term debt

c. equity share capital,

d. government bond

Discussion
b. unsecured short-term debt

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