Question 1 Net working capital is defined as current assets divided by current l
ID: 2666006 • Letter: Q
Question
Question 1
Net working capital is defined as current assets divided by current liabilities.
Answer
True
False
Question 2
A conservative current operating asset financing approach will result in permanent current assets and some seasonal current assets being financed using long-term securities.
Answer
True
False
Question 3
The overriding goal of inventory management is to ensure that the firm never suffers a stock-out, i.e., never runs out of an inventory item.
Answer
True
False
Question 4
The longer its customers normally hold inventory, the longer the credit period supplier firms normally offer. Still, suppliers have some flexibility in the credit terms they offer. If a supplier lengthens the credit period offered, this will shorten the customer's cash conversion cycle but lengthen the supplier firm's own CCC.
Answer
True
False
Question 5
The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the average collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital. Other things held constant, the shorter the CCC, the more effective the firm's working capital management.
Answer
True
False
Net working capital is defined as current assets divided by current liabilities.
Answer
True
False
Explanation / Answer
1.False 2.True 3.True 4.True 5. True
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