Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the CAIB Three Exam with our practice quiz. Enhance your knowledge with interactive flashcards, multiple-choice questions, and detailed explanations. Ensure your readiness to excel!

Practice this question and more.

Which financial factors significantly impact the working capital of a contractor?

Supply chain efficiency
Customer paying habits
Product pricing strategies
Marketing tactics

The correct answer is: Customer paying habits

The impact of customer paying habits on the working capital of a contractor is significant because it directly influences cash flow. When customers take longer to pay invoices or have inconsistency in meeting their payment terms, it can lead to cash flow shortages. Working capital is essentially the difference between current assets and current liabilities, so if cash from accounts receivable is delayed, a contractor may struggle to cover operational expenses, pay suppliers, or invest in new projects. While factors such as supply chain efficiency and product pricing strategies can also affect a contractor’s financial situation, they do not have as direct or immediate an impact on cash flow as customer payment behaviors. Marketing tactics can help in acquiring more customers or enhancing brand visibility, but unless this translates into prompt payments from clients, it does not substantially influence working capital. Thus, understanding and managing customer payment habits is critical for maintaining a healthy working capital position.