Mr. Omar is a Financial Manager of an Omani industrial company located in Muscat that has another three different branches in the Omani Market. The head company besides other branches are dealing with many suppliers and many customers on a daily bases; Mr. Omar wants to evaluate the working capital in all branches for the year 2020 in order to improve the operating performance of the company and make suitable and needed decisions based on results as well as he will need some calculations with regard to the cash conversion cycle of each branch and evaluate different elements in the operating cycle so that will enable him to manage the working capital properly and improve the over whole performance in future. The Financial statements of the head company in Muscat shows a Net Sales of OMR 3,305,000, Beginning Inventory of OMR 400,000, Ending Inventory OMR 220,000, Average A/R are OMR 410,000, Average A/P are OMR 320,000, the costs of goods sold equals to OMR 1,900,000 and Net purchases are 70% of costs of goods sold. you are working in the financial department of the company and you have been assigned and two of your colleagues to assist the financial manager with regard of all needed data and information from other different departments such as warehouse, production and sales of all branches that are located in Salalah, Nizwa, Sohar to smooth and accelerate the process of managing the working capital; the following will be some issues you need to solve so you can provide accurate report to the financial manager: Which of the following statements is NOT correct with regard to the business working capital? a. Efficient working capital management leads to improve the operating performance of the business concern b. It is the amount of funds necessary to cover the cost of operating of the business c. Net Working Capital is the excess of current assets over the current liability of the concern during a particular period d. Efficient working capital management helps to meet short term liquidity and long term obligations Which of the following will lengthen the cash conversion cycle? a. The firm adopts a policy of reducing payables payment turnover b. The average inventory conversion period falls from 50 days to 36 days c. A temporary situation in the commodity market forces the firm to increase stock of raw materials while prices are d. Customers are given a larger discount for cash transactions, which reduces the receivable collection period. low Which component of the cash conversion cycle shows improvement if the number of days increases? a. Payables payment period b. None of the given options C. Inventory conversion period d. Receivables collection period Which of the following statements about short-term financial management is true? a. It can be conducted without being worried about maximizing firm value b. None of the given options c. It focuses on the selection of the correct fixed assets in which to invest d. It includes decisions with regard to the level of current liabilities The time interval between purchasing raw materials and collecting on sales of finished goods is known as the a. Accounts receivable cycle b. Inventory cycle c. Accounts payable cycle d. Operating cycle Assuming the amount of total assets remains unchanged, a decrease in current assets wil a. Result in a decreasing cash conversion cycle b. Cause a decrease in current liabilities c. Result in an increase in profitability d. Cause a decrease in net working capital
