Exam 14: Working Capital and Management of Current Assets

A decrease in the production time to manufacture a finished good will result in__________ in the cash conversion cycle.

All of the following managers would like to have large inventories EXCEPT the ___________manager.

A firm is analyzing a relaxation of credit standards that is expected to increase sales 10 percent. The firm is currently selling 400 units at an average sale price per unit of $575, and the variable cost per unit is $400 at the current sales volume. The average cost per unit is $425. What is the additional profit contribution from sales if credit standards are relaxed?

The credit applicant's _____________ is the amount of assets the applicant has available for use in securing the credit.

If the firm's cash discount period is decreased or cancelled, the sales volume can be expected to,___________ the bad debt expenses can be expected to___________ , and the profit per unit can beexpected to___________ _.

If the firm's credit period is decreased, the sales volume can be expected to increase, the investment in accounts receivable can be expected to increase, and the bad debt expenses can be expected to increase.

An increase in the current liabilities to total assets ratio has the effects of __________on profits and__________on risk.

One of the key inputs to the final credit decision is the credit analyst's subjective judgement of a firm's creditworthiness since it can provide a better feel of a firm's operation than any quantitative figures.

The aggressive financing strategy is a strategy by which the firm finances its current assets with short-term funds and its fixed assets with long-term funds.

Business risk is the risk of being unable to make the scheduled fixed payments associated with debt, leases, and preferred stock financing as they come due.

As credit standards are relaxed, sales are expected to___________ and the investment in accounts receivable is expected to ___________.

The firm's credit_________defines the minimum criteria for the extension of credit to a customer.

____________float is the delay between the receipt of a check and the actual deposit of it into the firm's account.

The credit applicant's___________is its ability to repay the requested credit.

Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer.

The increase in bad debts associated with tightening credit standards raises bad debt expenses and has a negative impact on profits.

An increase in the average payment period will result in___________in the operating cycle

A firm has an average age of inventory of 20 days, an average collection period of 30 days, and an average payment period of 60 days. The firm's cash conversion cycle is_________ days.

An increase in collection efforts will result in__________ in sales volume,__________ in the investment in accounts receivable,__________ in bad debt expenses, and__________ in collection expenditures.

A firm has a cash conversion cycle of 120 days, an average collection period of 25 days, and anaverage payment period of 50 days. The firm's average age of inventory is __________days.