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Interpretation of Accounts Using Simple Accounting Ratios Equity: Working Capital - SS2 Accounting Past Questions and Answers - page 1

1

What is working capital?

A

The amount of money a business has available to fund its day-to-day operations.

 

B

The amount of money a business has invested in long-term assets.

 

C

The amount of money a business owes to its suppliers.

D

The amount of money a business has in its bank account.

2

What are current assets?

A

Assets that can be quickly converted into cash.

B

Assets that are used for long-term investments.

C

Assets that a business has sold in the past year.

D

Assets that a business plans to sell in the future.

3

Why is managing working capital important for businesses?

A

It helps businesses cover their short-term expenses.

B

It ensures businesses have enough money to invest in long-term assets.

C

It helps businesses reduce their taxes.

 

D

It helps businesses increase their profits.

4

What can happen if a business does not have enough working capital?

A

It may struggle to pay its bills and could face bankruptcy.

 

B

It may have too much cash on hand.

C

It may have to pay more taxes than necessary.

D

It may have difficulty finding customers.

5

How is working capital calculated?

6

Why is too much working capital not always a good thing for a business?

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