BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Losses in business
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Conversion of current assets into non-current assets
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Use of short term funds for long term purposes
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All of the above
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Detailed explanation-1: -The cause of the decrease in working capital could be a result of several different factors, including decreasing sales revenues, mismanagement of inventory, or problems with accounts receivable.
Detailed explanation-2: -Correct answer: Option C) Paying a payment on long-term debt. Explanation: The difference between current assets and current liabilities is represented by net working capital. For the net working capital to decrease, the current assets should decrease, keeping current liabilities constant.
Detailed explanation-3: -Net decrease in working capital means excess of current liabilities over current assets.
Detailed explanation-4: -One of the most effective ways to reduce your working capital cycle is to have less cash sitting around in the form of stock. Using better stock control can help reduce the amount of time stock is held, and companies could look at ‘sale or return’ agreements with suppliers to reduce cash being tied up, says Smith.