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FM2 - Working Capital

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18 views3 pages

FM2 - Working Capital

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bogartshitu09
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© © All Rights Reserved
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Financial management- Working capital

Practice questions with answers for HEEE

1. Which capital is needed by a firm to satisfy its long term investment needs?
a) Working capital
b) Fixed capital
2. Which capital is needed by a firm to meet its day to day requirement?
a) Working capital
b) Fixed capital
3. Net working capital equals
a) Total current assets
b) Total current assets – current liabilities
4. Total working capital equals
a) Total current assets
b) Total current assets – current liabilities
5. Working capital is needed to:
a) Purchase raw materials
b) Pay creditors
c) Pay salary
d) All
6. …………………….is a working capital that must be maintained at certain amount at all times
and it doesn’t fluctuate based on sales and time.
a) Temporary capital
b) Permanent capital
c) Semi-variable capital
7. ……………………….is required capital to meet seasonal demands and for special purposes
a) Temporary capital
b) Permanent capital
c) Semi-variable capital
8. ………………..working capital that remains constant up to some level and increases up on
sales/time.
a) Temporary capital
b) Permanent capital
c) Semi-variable capital
9. Which one is not true about excessive working capital?
a) Excessive accumulation of raw material
b) Increase liquidity
c) Increase profitability
d) Bad debt expense increases
10. If a company has rigid credit policy and sells goods only for cash:
a) It will have larger working capital
b) It will have less working capital
11. At economic depression, working capital:
a) Increases
b) Decreases
12. At growth and expansion stage:
a) Working capital increases
b) Working capital decreases
13. When availability of raw materials decrease,
a) Working capital must increase
b) Working capital must decrease
14. Working capital policy which minimizes risk by maintaining large amount of working capital:
a) Conservative WC policy
b) Relaxed WC policy
c) Fat cat WC policy
d) All
15. Moderate WC policy:
a) minimizes risk by maintaining large amount of working capital
b) maintains moderate amount of WC according to moderate level of sales
c) maintains low amount of working capital even when sales increases
16. Aggressive working capital policy (lean and mean, restricted):
a) minimizes risk by maintaining large amount of working capital
b) maintains moderate amount of WC according to moderate level of sales
c) maintains low amount of working capital even when sales increases
17. High risk and profitability policy
a) Moderate working capital policy
b) Conservative working capital policy
c) Aggressive working capital
18. To determine the appropriate finance mix, which method tries to match the expected life of
assets with expected life of sources of funds?
a) Conservative
b) Aggressive
c) Hedging approach
19. Hedging/matching approach:
a) Long term finance shall be used to acquire fixed assets
b) Short term finance is used to acquire temporary or variable assets
c) Both
20. Which finance mix approach uses long term financing for both permanent and temporary
assets?
a) Conservative
b) Aggressive
c) Hedging approach

Answers
1. B
2. A
3. B
4. A
5. D
6. B
7. A
8. C
9. C
10. B
11. B
12. A
13. A
14. D
15. B
16. C
17. C
18. C
19. C
20. A

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