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Working capital - SS2 Commerce Past Questions and Answers - page 1

1

What does working capital measure?

 

A

Long-term financial health

 

B

Short-term financial health

 

C

Profitability of a company

 

correct option: b

Short-term financial health

 

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2

How is working capital calculated?

 

A

By subtracting current liabilities from current assets

B

By adding long-term liabilities to long-term assets

 

C

 By dividing total assets by total liabilities

 

correct option: a

By subtracting current liabilities from current assets

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3

What is the primary purpose of working capital?

 

A

Cover long-term debts

 

B

Cover short-term expenses and obligations

 

C

Invest in long-term projects

correct option: b

Cover short-term expenses and obligations

 

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4

Why is sufficient working capital important for a company?

 

A

To maximize profits

 

B

To avoid disruptions in operations and maintain cash flow

 

C

To invest in long-term assets

 

correct option: b

To avoid disruptions in operations and maintain cash flow

 

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5

What can happen if a company has insufficient working capital?

 

A

Increased profitability

 

B

Cash flow problems and difficulty paying bills

 

C

Higher return on investment

correct option: b

Cash flow problems and difficulty paying bills

 

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6

Define working capital in simple terms.

 

Working capital refers to the funds or resources that a company has available to meet its day-to-day operational needs and cover short-term obligations.

 

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7

Why is working capital important for a company's operations?

 

Working capital is important for a company's operations because it ensures that the company has enough funds to cover short-term expenses, maintain liquidity, and avoid disruptions in its day-to-day activities.

 

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