Question

The Chief Financial Officer’s primary goal in managing the working capital cycle is to:

a. Leverage the long-term debt to minimize interest payments on debt

b. Improve the debt to equity ratio and thus improve bond ratings

c. Ensure that cash is available to pay employees, pay creditors and operate the business

d. Shorten the revenue cycle to improve the amount of money in accounts receivables.

Answer 1

Solution:

A business uses working capital in its daily operations.The goal of working capital management is to maximize the operational efficiency.Working capital management ensuress that the firm has sufficient resources to continue its operation and avoid costly interruption.With cash available in hand,a business can operate smoothly.

Accordingly from the given options,the Chief Financial Officer’s primary goal in managing the working capital cycle should be to ensure that cash is available to pay employees, pay creditors and operate the business.

Thus correct answer is Option C