Exam 12: The Management of Working Capital

Use the information below to answer the following questions Aqua Ltd has forecast the yearly demand for its product as 5,000 units. 100 units of material must be used to produce the product. The cost of placing a single order for raw materials is $20, and the cost of holding one unit of material is $0.40 a year. -Refer to the information above. The economic order quantity for raw materials is:

Working capital for a manufacturer normally makes up percentage of total assets.

The motive behind the holding of cash balances to protect the firm from unforeseen cash requirements is known as:

Chocolate Ltd uses 18,000 litres of chocolate syrup each year. The cost of carrying its chocolate syrup inventory is $0.50 per litre per year. The cost of ordering the syrup is $150 per delivery. The firm uses chocolate syrup at a constant rate throughout the year. The economic order quantity for chocolate syrup is:

An assumption of the economic order quantity model is:

Which statement concerning inventory is not true?

The firm's operating cash cycle is:

Which of the following is the most useful tool for managing cash?

When trying to assess the credit standing of a customer, a financial analyst could use which of the following sources?

The operating cash cycle is measured as:

Annual demand for product G is 117,000 units and the lead-time for orders is three weeks. Demand is steady throughout the year. Assuming that no buffer stock is held, at what level of inventory should the company re-order product G?

Which of these is not a cost of holding insufficient levels of inventory?

The statement concerning trade credit that is true is:

If creditors are paid 12 times a year, what, on average, is the creditors turnover period in days?

Violet Pty Ltd usually takes 50 days to pay its suppliers. In order to encourage prompt payment, supplier T offers Violet Pty Ltd a 2% discount for payment within 10 days. What is the annual percentage cost of the discount to Violet Pty Ltd?

Total purchases are $130,000 and credit purchases are 80% of total purchases. If trade creditors at the beginning of the period are $15,000 and at the end of the period are $13,000m the average settlement period for creditors, in days, is:

Calculate the operating cash cycle in days if all sales are for cash, inventory is turned over 7 times a year and creditors are paid on average 5 times a year.

Use the information below to answer the following questions Aqua Ltd has forecast the yearly demand for its product as 5,000 units. 100 units of material must be used to produce the product. The cost of placing a single order for raw materials is $20, and the cost of holding one unit of material is $0.40 a year. -Refer to the information above. How often should the company place an order?

Flash Enterprises usually takes 60 days to pay its suppliers. In order to encourage prompt payment, supplier Y offers Flash Enterprises a 1.5% discount for payment within 10 days. What is the annual percentage discount forgone if Flash Enterprises does not take up the discount offer?

A firm has daily credit sales of $50,000, and its average collection period is 50 days. Its average debtors balance is: