Please write down your choice in the blank before the question.

1. _____ Which of the following is NOT part of working capital management? a. Cash management. b. Accounts receivable management. c. Accounts payable management. d. Notes payable management.

2. _____ Which of the following statements regarding working capital management is NOT CORRECT? a. Running an operation with inadequate working capital may cause production disruptions, sales slowdown and other problems. b. Lower net operating working capital (NOWC)typically means higher FCF. c. The goal of working capital management is to minimize the NOWC. The lower the NOWC, the better. d. The goal of working capital management is to enable the firm to operate with minimum yet adequate working capital.

3. _____ Which of the following statements regarding cash conversion cycle (CCC) is CORRECT? a. CCC is equal to inventory conversion period (ICP) plus average collection period (ACP) plus payables deferral period (PDP). b. Inventory conversion period (ICP) is the average lifetime of inventories and found as total inventories divided by average daily sales. c. Average collection period (ACP) is the average lifetime of accounts receivable and found as total accounts receivable divided by average daily sales. d. Payables deferral period (PDP) is the average lifetime of accounts payable and found as total accounts payable divided by average daily sales.

4. _____ Which of the following is NOT a way to help reduce cash holding? a. Collecting payments faster by requiring payments on wire. b. Paying suppliers early to take advantage of the discount. c. Arranging for customer payments and its own bill payments to occur on the same dates. d. Performing better cash budget analysis to forecast future cash flows.

5. _____ Which of the following statements regarding trade credit is CORRECT? a. Credit term 2/10, net 20 means the full payment is expected within 30 (=10+20) days from the invoice day, and a 2% discount is available if payments are made within 10 days from the invoice day. b. For a credit-taking company, holding all else equal, the longer the credit period, the more costly the trade credit is. c. A firm should always use the free trade credit, but avoid the costly trade credit. d. Financially strong firms often avoid the costly trade credit, but small firms often use trade credit as a convenient source of short-term borrowing.