Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to . A. meet its cash obligations as they occur and take advantage of prompt payment B. discounts C. support the proper level of sales and take prompt payment discounts D. maintain current and acid-test ratios at or above industry norms E. meet its cash obligations as they occur and support the proper level of

Risk, as it relates to working capital, means that there is jeopardy to the firm for not 

maintaining sufficient current assets to .

A. meet its cash obligations as they occur and take advantage of prompt payment

B. discounts

C. support the proper level of sales and take prompt payment discounts

D. maintain current and acid-test ratios at or above industry norms

E. meet its cash obligations as they occur and support the proper level of
by

1 Answer

Answer :

D. maintain current and acid-test ratios at or above industry norms
by

Related questions

Identify which technique will not help a company to optimise its working capital cycle. A. Offering discounts for early payment by debtors B. Using cash management models to optimise the level of cash held C. Taking full advantage of credit offered by trade suppliers D. Applying the economic order quantity model to stock management E. Adopting the use of just-in-time stock management

Description : Identify which technique will not help a company to optimise its working capital cycle. A. Offering discounts for early payment by debtors B. Using cash management models to optimise the level of ... order quantity model to stock management E. Adopting the use of just-in-time stock management

Last Answer : B. Using cash management models to optimise the level of cash held

How can a firm provide a margin of safety if it cannot borrow on short notice to meet its needs? A. Maintain a low level of current assets (especially cash and marketable securities). B. Shorten the maturity schedule of financing. C. Increasing the level of fixed assets (especially plant and equipmentD. Lengthening the maturity schedule of financing

Description : How can a firm provide a margin of safety if it cannot borrow on short notice to meet its  needs? A. Maintain a low level of current assets (especially cash and marketable securities) ... the level of fixed assets (especially plant and equipment D. Lengthening the maturity schedule of financing

Last Answer : D. Lengthening the maturity schedule of financing

________ is characteristic of liquidity ratios. (a) Organization’s ability to meet its current debt obligations (b) Organization’s use of debt to finance its assets and whether it’s able to meet the interest payments on the debt ;(c) How efficiently the firm is using its assets ;(d) None of given options

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Last Answer : (a) Organization’s ability to meet its current debt obligations 

In deciding the optimal level of current assets for the firm, management is confronted with . A. a trade-off between profitability and risk B. a trade-off between liquidity and risk C. a trade-off between equity and debt D. a trade-off between short-term versus long-term borrowing

Description : In deciding the optimal level of current assets for the firm, management is confronted with  . A. a trade-off between profitability and risk B. a trade-off between liquidity and risk C. a trade-off between equity and debt D. a trade-off between short-term versus long-term borrowing

Last Answer : A. a trade-off between profitability and risk

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

Description : 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 ... the financial manager to make a decision and not address the issue again for several months.

Last Answer : B. Current assets of the typical manufacturing firm account for over half of its total assets.

Identify the incorrect statement in connection with working capital management. A. Long-term funds are more expensive than short-term funds but also riskier B. The objectives of working capital management are profitability and liquidity C. Permanent current assets should be financed from long-term sources if a moderate or matching policy is adopted D. Conservative financing policies use short-term funds to finance only part of fluctuating current assets E. Aggressive financing policies increase profitability at the cost of higher risk

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The amount of current assets required to meet a firm's long-term minimum needs is referred to as working capital. A. permanent B. temporary C. net D. gross

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Which of the following is a basic principle of finance as it relates to the management of working capital? A. Profitability varies inversely with risk. B. Liquidity moves together with risk. C. Profitability moves together with risk. D. Profitability moves together with liquidity.

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Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy? A. The firm uses long-term financing to finance all fixed and current assets. B. The firm will see an increase in its expected profits. C. The firm will see an increase in its risk profile. D. The firm will increase its dividends per share (DPS) this period.

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To the nearest rupee, what is the net present value of a replacement project whose cash flows are -Rs.104,000; Rs.34,444; Rs.39,877; Rs.25,000; and Rs.52,800 for years 0 through 4, respectively? The firm has decided to assume that the appropriate cost of capital is 10% and the appropriate risk-free rate is 6%. A. Rs.15,115 B. Rs.26,798 C. Rs.33,346 D. Rs.48,121

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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.

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Which of the following is least likely to be part of the calculation of the terminal- year incremental net cash flow for an energy-related expansion project? A. An initial working capital investment is now returned as an additional cash inflow B. Disposal/reclamation costs C. Capitalized expenditures D. Salvage value of any sold or disposed assets

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A firm establishes which of the following pricing objectives to maintain or increase its product's sales in relation to total industry sales? A)Cash flow B)Sales potential C)Product quality D)Market share E)Status quo

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Permanent working capitalA. varies with seasonal needs B. includes fixed assets C. is the amount of current assets required to meet a firm's long-term minimum needs D. includes accounts

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Which of the following statements relating to working capital financing is not correct? A. An aggressive policy uses long-term debt to finance fluctuating current assetsB. Long-term debt is less risky that short-term debt C. A conservative policy uses long-term debt to finance fixed assets D. Short-term debt is cheaper than long-term debt E. The matching principle indicates that fluctuating current assets should be financed by short-term debt

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Which of the following statements is true of Insured Asset Allocation? A. It is aimed at benefiting from short-term under pricing and over pricing of assets. B. In this strategy the risk tolerance of the investor are ignored. C. In this strategy long-term predictions regarding the capital markets are used. D. In this strategy the asset mix is held constant. E. It is a strategy aimed at achieving the objectives of the investor without depending on market timing.

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Net working capital refers to A. total assets minus fixed assets B. current assets minus current liabilities C. current assets minus inventories D. current

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Having defined working capital as current assets, it can be further classified according to . A. financing method and time B. rate of return and financing method C. time and rate of return D. components & time

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The amount of current assets that varies with seasonal requirements is referred to as working capital. A. permanent B. net C. temporary D. gross

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Which of the following illustrates the use of a hedging approach to financing assets? A. Temporary current assets financed with long-term liabilities. B. Permanent working capital financed with long-term liabilities. C. Short-term assets financed with equity D. All assets financed with a mixture of 50% equity and 50% long-term debt

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The payback period is the period A. a project takes to pay back the loan taken to purchase the capital assets B. equal to the useful life of the machines C. a project takes to recover its initial cash outflow D. over which the project will be getting operating cash inflows

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Under a conservative financing policy a firm would use long-term financing to finance some of the temporary current assets. What should the firm do when a "dip" in temporary current assets causes total assets to fall below the total long-term financing? A. Use the excess funds to pay down long-term debt. B. Invest the excess long-term financing in marketable securities. C. Use the excess funds to repurchase common stock. D. Purchase additional plant and equipment.

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Which of the following factors does not need to be considered when formulating policies on the level and financing of working capital? A. The attitude to risk of a company’s managers B. The relative cost of short-term and long-term finance C. The availability of revenue reserves and capital reserves D. Terms of trade offered by competitors

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In proper capital budgeting analysis we evaluate incremental cash flows. A. accounting B. operating C. before-tax D. financing

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All of the following influence capital budgeting cash flows except . A. choice of depreciation method for tax purposes B. economic length of the project C. projected sales (revenues) for the project

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)In a program or project plan, there are always revisions to account for new or missing data. Which one of the following provides the best reason for performing a revision of the plan? 1. A supplier has changed the way their product is delivered to your supplier 2. Project tasks are crashed to meet their end dates 3. Human resources will remain constant through out the project 4. Historical data on a similar project suggests that risk events are not included in the current plan.

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Which of the following statements is true in relation to liabilities? A. Claims against the resources. B. Currently existing obligations which the firm intends to meet at some time in the future. C. It must be capable of being expressed in money terms. D. All of the above

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A Firm is considering undertaking a project that would yield annual profits (after depreciation) of Rs 68,000 for 5 years. The initial outlay of the project would be Rs 800,000 and the project's assets would have a residual value of Rs 50,000 at the end of the project. What would be the accounting rate of return for this project? A 16% B 8.5% C 8.0% D 9.1%

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Last Answer : A 16%

During a merger and acquisition transaction, the ability to find and use good comparable data for a valuation is relatively ____________. a) easy because each successful company within an industry uses the same ratios b) easy because public stock price fluctuation is not sufficient or erratic enough to make a difference c) difficult because book value is adjusted in small companies as FIFO is the method of choice and in public companies’ book value is static due to LIFO d) difficult because size differential, management depth, product diversity and access to lines of credit seldom match the company being valued

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Last Answer : B. 10%

Which of the following is an important fact about working capital in Capsim? a. The life blood of any organization b. All of the money tied up in things you one day wish to sell c. Can be seen on the balance sheet under the headings current assets and current liabilities d. The change of working capital can be seen on the cash flow statement e. All of the above are important

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Last Answer : An overly complex organizational structure involving unusual lines of authority.

Which of the following statements about the presence of gallstones in diabetes patients is/are correct? A. Gallstones occur with the same frequency in diabetes patients as in the healthy population. B. The presence of gallstones, regardless of the presence of symptoms, is an indication for cholecystectomy in a diabetes patient. C. Diabetes patients with gallstones and chronic biliary pain should be managed nonoperatively with chemical dissolution and/or lithotripsy because of severe complicating medical conditions and a high operative risk. D. The presence of diabetes and gallstones places the patient at high risk for pancreatic cancer. E. Diabetes patients with symptomatic gallstones should have prompt elective cholecystectomy, to avoid the complications of acute cholecystitis and g

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If a company moves from a "conservative" working capital policy to an "aggress ive" policy, it should expect . A. liquidity to decrease, whereas expected profitability would increase B. expected profitability to increase, whereas risk would decrease C. liquidity would increase, whereas risk would also increase D. risk and profitability to

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Which of the following statements concerning analytical procedures is true? a. Analytical procedures are more efficient, but not more effective, than tests of details of transactions. b. Analytical procedures used as risk assessment procedures use data aggregated at a high level. c. Analytical procedures can replace tests of controls in gathering audit evidence to support the assessed level of control risk. d. Analytical procedures usually involve comparisons of ratios developed from recorded amounts with ratios developed by management

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Which one of the following ratios is likely to be affected the most on account of price level changes ? (A) Current Ratio (B) Inventory Turnover Ratio (C) Debtors’ Turnover Ratio (D) Fixed Assets Turnover Ratio

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The __________ of a chemical company can be obtained directly from the balance sheet as the difference between current assets and current liabilities. (A) Cash ratio (B) Net working capital (C) Current ratio

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Last Answer : (B) Net working capital

Normally a performance bond, depending upon the state, only stipulates that the contractor will guarantee the work for a certain period of time. Answer: D (8)Which contract type places the most risk on the seller? 1. Cost plus percentage fee 2. Cost plus incentive fee 3. Cost plus fixed fee 4. Fixed price plus incentive fee 5. Firm fixed price

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A profitability index (PI) of .92 for a project means that . A. The project's costs (cash outlay) are (is) less than the present value of the project's benefits B. The project's NPV is greater than zero C. The project's NPV is greater than 1 D. The project returns 92 cents in present value for each current rupee invested (cost)

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According to rating agency Fitch, Indian banks will need approximately how much capital by 2019 to meet new Basel III capital norms? A) $100 billion B) $90 billion C) $85 billion D) $70 billion E) $95 billion

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