Exam 24: Working Capital Management: Current Assets and Current Liabilities
An example of a spontaneous source of funds is:
C
Which is NOT one of the reasons why firms hold cash?
C
An important tool used in assessing the quality of receivables is the aged accounts receivable report.What is it, how does it work, and what are its positive and negative characteristics?
The aged accounts receivable report is a tool used by firms to assess the quality of their receivables, and is often required by banks before they authorize loans to the requesting firm.The aged accounts receivable report categorizes the balances in receivables according to how long they have been outstanding.Generally receivables that have not been outstanding for very long are regarded as higher quality than those that have been outstanding beyond their due date.However, this characterization has its limitations because it does not distinguish between long standing accounts of credible borrowers (i.e., government)versus those of less credibility (i.e., another company); as such the report treats all borrowers as if they hold the same credit risk.This can be misleading when trying to correctly interpret the quality of a firm's receivables.
The economic order quantity (EOQ)model of inventory management determines the optimal inventory level that:
If the current credit policy is 3/30 net 60, which of the following tightens the credit policy?
Queue de Castor Company is being offered a one-year $1.45 million operating line of credit at a rate of 5.75%.There is a monthly 0.5% commitment fee on the unused amount.The firm borrows only $0.5 million during the first 8 months of the loan and reduces its loan by a further $0.2 million for the remaining 4 months.What is the effective annual cost (in percent)of this loan arrangement?
Firms implement centralized systems with respect to receivables and payables in order to:
Which of the following is considered as a main source of cash in a business cycle?
Under which scenario does the economic order quantity inventory management model work poorly?
Which of the following pairs does not include a motive for holding cash?
A firm would like to issue $15 million face value of 30-day bankers' acceptances quoted at 5.5% at a stamping fee of 0.25%.What is the effective annual cost to the firm?
Which of the following is not an example of a near-cash item?
One way to alleviate the problem of the low returns associated with cash, but still maintain high liquidity is to
The following pairs are all costs of holding inventory except:
Which of the four motives for holding cash do firms cite when planning for major outlays?
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