Answer Happy

This section consists of Twelve (12) statements. Each statement
is worth one (1) mark. You are required to indicate which of the
statements are true or false.
Statement
True
False
1.1
Accrued expenses represent a spontaneous and interest-free
source of financing.
True
False
1.2
Cash credit is not the common form of financing for meeting
working capital requirements.
True
False
1.3
The basic objective 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 in the firm.
True
False
1.4
The longer the processing period of manufacture, the larger the
amount of working capital needed.
True
False
1.5
The rate of return on investments increases with the shortage of
working capital.
True
False
1.6
Net working capital is the excess of current liabilities over
current assets.
True
False
1.7
Credit terms include period of credit and cash discount granted
to the customers for early payment.
True
False
1.8
In practice, firms follow credit policies ranging between
stringent and lenient policies.
True
False
1.9
If goods are perishable, longer payment period is a desirable
receivable management policy.
True
False
1.10
Tradeoff between profitability and liquidity is important for
achieving optimum amount of receivables.
True
False
1.11
When the firm sells 2/30, net 60, it means 2% cash discount
would be allowed, if payment is made within 60 days.
True
False
1.12
A proper inventory control system
helps the enterprise in solving the problems of liquidity,
eliminating excessive stocks, and achieving increased profits, with
substantial reduction in working capital.
True
False