Exam 14: Working Capital and Management of Current Assets

The risk of conservative financing requirements is low because of its high level of net workingcapital, and the fact that the strategy does not require the firm to use any of its limited short-term borrowing capacity.

The turnover of accounts receivable can be calculated by dividing annual sales by accounts receivable.

When a firm's cash conversion cycle is negative, the firm should benefit by being able to use the financing provided by the suppliers of its production inputs to help support aspects of the business other than just the operating cycle.

In the ABC system of inventory management, the ___________ method or system is appropriate formonitoring B items.

In international trade when a Canadian company sells a product in France, the Canadian company experiences an exchange rate gain if the franc depreciates against the dollar before the Canadian exporter collects on its accounts receivable.

The firm's permanent financing requirement is financed with___________in the aggressive financing strategy.

__________are established to eliminate the necessity of checking a major customer's credit each timea major purchase is made.

A firm has an average age of inventory of 90 days, an average collection period of 40 days, and an average payment period of 30 days. The firm's operating cycle is ____________days.

The difference between the number of days resources are tied up in the operating cycle and the number of days the firm can use spontaneous financing before payment is made is the

One way to improve the cash conversion cycle is to

When should credit standards be relaxed?

The costs associated with inventory can be divided into the following groups EXCEPT

In the ABC system of inventory management, the __________method or system could be utilized to control C items.

Flum Packages, Inc. Assets Liabilities \& Equity Current assets \ 10,000 Current Liabilities \ 5,000 Fixed assets 20,000 Long-term debt 12,000 Equity 13,000 ---- --- Total \3 0,000 Total \3 0,000 The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent. -The firm's initial ratio of current to total asset is___________

The___________ is an inventory technique that takes into account various operating and financial costs to determine the order quantity for a specific inventory item.

A firm's credit selection is the process of determining the minimum requirements for extending credit to a customer.

A credit manager typically gives primary attention to ___________in extending credit to an applicant.

The firm's operating cycle (OC) is simply the sum of the average age of inventory (AAI) and the average payment period (APP).

The credit applicant's____________ is the financial strength of the applicant as reflected by itsownership position.

A firm which uses the aggressive financing strategy plans to purchase a major fixed asset financedwith a loan. The most likely consequence of this action is