more Cash Management Learn vocabulary, terms, and more with flashcards, games, and other study tools. c.current assets. Which of the following working capital strategies is the most aggressive? permanent temporary net gross End of Question 9 Question 10. Zero working capital is a situation in which there is no excess of current assets over current liabilities to be funded. Working capital, also known as net working capital (NWC), is a measure of a company's liquidity, operational efficiency and short-term financial health. Start studying Chapter Two Financial Statements,Taxes, and Cash Flows. From a more simplistic viewpoint, working capital cycle is the amount of time between the payment for goods supplied and the final receipt of cash accumulated from the sale of the same goods. A) When current assets of a firm exceed its current liabilities,a firm is said to have negative net working capital. Current Assets Plus Current Liabilities.d. In finance, “working capital” means the same thing as a.total assets. Which of the following would be consistent with a more aggressive approach to financing working capital? Many people use net working capital as a financial metric to measure the cash and operating liquidity position of a business. Which one of the following will decrease the net working capital of a firm? Total current assets B. Failing that, the account must be settled in 30 days. (i) Gross Concept of Working Capital: The gross working capital refers to the total fund invested in current assets. Assume the current ratio is greater than 1.0. Net working capital measures the short-term liquidity of a business, and can also indicate the ability of company management to utilize assets efficiently. Net working capital refers to: Recommended Jobs. Current Assets Divided By Current Liabilities.e. Thus, it is important to have an optimum quantity of working capital to run a business. a. an increase in bonds and a decrease in equity b. an increase in preferred stock and a decrease in accounts payable c. an increase in plant financed by issuing bonds d. an increase in cash and a decrease in accounts receivable . Working capital is nothing but the difference between … asked Dec 20, 2018 in Business by Verenice17. "Making greater use of short term finance and minimizing net short term asset." a) ... What does the following trade credit jargon refer to? Yes, if in any particular case, the current assets are less than the current liabilities, then the difference between the two will be called ‘Working Capital Deficit.’ What makes an asset current is that it can be converted into cash within a year. B) When current assets of a firm are less than its total assets,a firm is said to have positive net working capital. The amount of current assets that varies with seasonal requirements is referred to as _____ working capital. Working capital mentioned in the balance sheet is an indication of the company’s current solvency in repaying its creditors. Net Profit Ratio Signifies: (a) Operational Profitability, (b) Liquidity Position, (c) Big-term Solvency, (d) Profit for Lenders. What EY liquidity and working capital team can do for you. Whereas excessive working capital results in increased cost for the business. '5/7 net 30'. a) A discount of 5% will be given for full payment within 7 days. 3. Working capital management is concerned with the problem that arises in attempting to manage the current assets, the current liabilities and the inter-relationship that exist between them. The banks and financial institutions do also adopt the net working capital concept as it helps assess the requirement of the borrower. The concept is used to drive down the level of investment required to operate a business, which can also increase the return on investment for shareholders.. What is Net Working Capital? Financial Analyst. Capital employed refers to the amount of capital investment a business uses to operate and provides an indication of how a company is investing its money. 2. b.fixed assets. Net working capital C. Total current liabilities D. Current ratio? The term ‘working capital management’ primarily refers to the efforts of the management towards effective management of current assets and current liabilities. Working Capital Management Definition. Gross working capital refers to the total current assets of the company, i.e., all the assets of the company that can be converted into cash within a year and examples of which include accounts receivables, inventory of raw material, WIP inventory, finished goods inventory, cash, and bank balance, marketable securities such as T-Bills, commercial paper, etc. b.Financing permanent […] What makes a … It shows how much short-term resources the company would have in continuing its operations if it had to settle all of its current liabilities. d.current assets minus current liabilities. and short term investments. Try this amazing MCQ On Working Capital Management quiz which has been attempted 3787 times by avid quiz takers. The goal of working capital management is to manage a firm’s current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. It consists of the sum of all current assets and current liabilities. The amount of current assets required to meet a firm's long-term minimum needs is referred to as _____ working capital. Net working capital, or simply "working capital", refers to current assets minus current liabilities.. Net working capital is a measure of liquidity. Cash, Accounts Receivable, And Inventory.b. Cash is used to buy marketable securities. Net working capital refers to which of the following? Working capital refers to a specific subset of balance sheet items. Question: Net Working Capital Refers To Which Of Thefollowing?a. A)selling inventory at cost B)collecting payment from a customer C)paying a payment on a long-term debt D)selling a fixed asset for book value E)paying a … current assets divided by current liabilities current assets minus current liabilities cash, accounts receivable, and inventory current assets plus current liabilities notes payable, account, and accounts payable Notes payable is a … The figure is commonly used in the Return on Capital Employed (ROCE) ratio Also explore over 113 similar quizzes in this category. Which of the following increases net working capital? a.Financing short-term needs with short-term funds. Working capital normally refers to net working capital. There are two concepts of working capital: (i) Gross concept, and (ii) Net concept. Open Hint for Question 9 in a new window. Current assets are those assets which are easily converted into cash within a time period of one year. In finance, “working capital” means the same thing as 1. Net working capital is the aggregate amount of all current assets and current liabilities.It is used to measure the short-term liquidity of a business, and can also be used to obtain a general impression of the ability of company management to utilize assets in an efficient manner. Working Capital and Net Current Assets are generally considered to be the same. This means working capital should neither be more nor less than the amount actually required by the business. A. selling inventory at cost B. collecting payment from a customer C. paying a payment on a long-term debt D. selling a fixed asset for book value E. … To calculate net working capital, use the following formula: Insufficient working capital amounts to a shortage of resources. is the most aggressive strategy, also known as 'riding the yield curve', but also yield the most return If you borrow short term (cheaper than long term funds) and invest in long term assets for higher yields ( in other words minimise net short term asset). In Ratio Analysis, the term Capital Employed refers … Net working capital is the difference between current assets and current liabilities ... All of the following are affected when merchandise is purchased on credit except: A. Which one of the following will decrease the net working capital of a firm? 4. Other things held constant, which of the following will cause an increase in net working capital? Which of the following terms refer to the difference between the current assets and the current liabilities ? The working capital cycle refers to the minimum amount of time which is required to convert net current assets and net current liabilities into cash. Working capital, also known as net working capital (NWC), is a measure of a company's liquidity, operational efficiency and short-term financial health. Businesses use net working capital to measure cash flow and the ability to service debts. The definition of working capital (shown below) is simple: Working capital = Current assets - current liabilities. Many management teams struggle to sustain good control over short-term cash flows and the working capital that drives them, however the COVID-19 crisis is unique in its combination of challenges making mitigation even more complex. A positive net working capital indicates that the firm has money in order to maintain or expand its operations. Net working capital is defined as the excess of current assets over current liabilities. Although capital employed can be defined in different contexts, it generally refers to the capital utilized by the company to generate profits. Net working capital refers to the difference between the company's current assets and liabilities. Working capital refers to the amount which the company requires with the purpose of financing the day to day operation and example of which includes the working capital of $100,000 with a manufacturer which is calculated by subtracting current liabilities of $200,000 from the current assets of $300,000. Days working capital is a term that refers to the number of days it takes for a business to convert its working capital into actual revenue.This calculation is important, since it can help a business identify how efficiently the company is currently functioning. 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