Practice Test Geeks(CFC) Certified Financial Controller Practice Test
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Working Capital Management Flashcards

7 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Working Capital Management flashcards as text

  1. If a company's DIO is 45 days, DSO is 30 days, and DPO is 25 days, what is the Cash Conversion Cycle?

    Answer: 50 days

    CCC = DIO + DSO - DPO = 45 + 30 - 25 = 50 days, representing the net days to convert operations into cash inflows.

  2. Which inventory management approach aims to minimize holding costs by receiving goods only as they are needed for production or sale?

    Answer: Just-In-Time (JIT)

    Just-In-Time (JIT) minimizes inventory holding and storage costs by scheduling deliveries to arrive precisely when needed, reducing excess stock.

  3. A company has $90,000 in accounts receivable and annual credit sales of $1,095,000. What is the DSO (use 365 days)?

    Answer: 30 days

    DSO = (Accounts Receivable / Annual Credit Sales) × 365 = ($90,000 / $1,095,000) × 365 = 30 days.

  4. Which technique allows a company to sell its accounts receivable to a third party at a discount to obtain immediate cash?

    Answer: Factoring

    Factoring involves selling accounts receivable to a financial institution (factor) at a discount, immediately improving cash flow without waiting for customers to pay.

  5. What is the Economic Order Quantity (EOQ) model designed to minimize?

    Answer: Total inventory ordering and holding costs combined

    EOQ minimizes total inventory costs by finding the optimal order size that balances ordering costs (per order placed) against holding costs (per unit stored per period).

  6. Which working capital financing approach matches the maturity of financing to the life of the asset being financed?

    Answer: Hedging (matching) approach

    The hedging or matching approach pairs short-term financing with short-term assets and long-term financing with long-term assets, reducing refinancing risk.

  7. A company extends its credit terms from net 30 to net 45 days. What is the most likely immediate effect on the company's working capital?

    Answer: Increase in accounts receivable

    Extending customer credit terms allows customers more time to pay, increasing the balance of outstanding accounts receivable on the company's books.