Practice working capital management including current ratio, quick ratio, cash conversion cycle, and managing receivables, inventory, and payables. Free questions.
Start practising now — it's free Read study guidesWorking capital — current assets minus current liabilities — measures short-term financial health. Managing it efficiently is one of the most impactful activities in corporate finance. Too much working capital ties up cash unnecessarily; too little creates liquidity risk.
The current ratio (current assets ÷ current liabilities) and quick ratio (current assets excluding inventory ÷ current liabilities) are primary liquidity measures. The cash conversion cycle — Days Inventory Outstanding + Days Sales Outstanding − Days Payable Outstanding — measures how long it takes to convert investments in inventory and receivables into cash. Shortening the CCC releases cash and improves financial flexibility.
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