Working Capital Management MCQ : Financial Management MCQ Chapter Wise Multiple Choice questions


Financial Management MCQ

Working Capital Management MCQ

Mention below are the working capital MCQ a chapter of Financial management. This MCQ will help you to understand the topic Working capital easily. So, you can score well in your Exam.

MCQ on Working Capital

1. Working capital is also known as excess of current assets over current liabilities.           True

2. Gross working capital is based on:

a)    Accrual Concept

b)   Money Measurement Concept

c)    Going Concern Concept

d)   Realisation Concept

3. Which of the following statements are correct?

a)    Working Capital is also known as circulating capital.

b)   Large organisation needs larger working capital.

c)    Shortage of working capital reduces return on investment.

d)   All of the above

4. Working capital management is concerned with:

a)    Management of capital

b)   Raising of funds for day to day operations

c)    Proper Management of cash arises in day to day operations.

d)   All of the above

5. Working Capital cycle involves the following:

a)    Acquisition of raw materials.

b)   Finished goods.

c)    Receivables.

d)   Cash.

e)   Work-in-progress.

Which of the sequence is correct?

a)    4, 3, 1, 5, 2

b)   1, 2, 3, 4, 5

c)    1, 5, 2, 3, 4

d)   4, 1, 2, 3, 5

6. Which one of the following pairs is not correctly matched?

a)      Capital Expenditure : Transportation costs of a machine

b)      Funds Flow Statement: Working Capital

c)       Reduction of Share Capital: Reconstruction

d)      Contribution: Sales – Cost

7. The working capital ratio is:

a)    Working capital / Sales

b)   Working capital / Total Assets

c)    Current assets / Current liabilities

d)   Current assets / Sales

8. Which of the following is not an application of working capital?

a)    Day-to-day expenditure of business

b)   Current obligations for payment

c)    Expenditure in the usual course of business

d)   Expenditure to acquire capital

9. Which of the following statement is not true about working capital management?

a)    Gross working capital refers to the capital invested in the total asset of an enterprise.

b)   Excess or shortage of working capital is not disadvantageous for an enterprise.

c)    Net working capital is the sum of all current assets.

d)   All of the above

10. Working capital represents the portion of current assets financial through long term funds. This indicates (1) net working capital and (2) gross working capital:

a)    1 is correct

b)   2 is correct

c)    Both 1 and 2 are correct

d)   Neither of the two is correct

11. Assertion (A): Management of working capital refers to the management of current assets and current liabilities.

Reason (R): But the major thrust of course, is on the management of current assets; because current liabilities arise in the context of current assets.  Codes:

a)    Both (A) and (R) are incorrect

b)   (A) is correct and (R) is incorrect

c)    Both (A) and (R) are correct

d)   (A) is incorrect, but (R) is correct

12. Which of the following factors affects the working capital requirement of a business unit?

a)    Nature of business

b)   Credit policy

c)    Production policy

d)   All of the above

13. Current assets do not include:

a)    Inventories

b)   Cash and cash equivalents

c)    Trade receivables

d)   All of the above

14. Which is not an example of current assets?

a)    Accrued incomes

b)   Bullions and coins

c)    Short term advances to creditors

d)   Bank overdraft

15. Which is not an example of current liabilities?

a)    Outstanding expenses

b)   Statutory liabilities

c)    Provident fund dues

d)   Sundry debtors

16. Which is of the following is a long term source of working capital?

a)    Issue of shares.

b)   Issue of debentures.

c)    Loans.

d)   Depreciation.

17. Assertion (A): Working capital refers to the gross working capital and represents the amount of funds invested in current assets.

Reason (R): Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of time.

a)    Only Assertions is correct

b)   Only Reason is correct

c)    Assertion and reason is correct

d)   Both Assertion and reason is incorrect.

18. Which of the following are sources of working capital?

a)    Loan and advances from commercial banks

b)   Trade credit

c)    Indigenous banker

d)   All of the above