Exam 22: Managing the Firms Assets

Match the term with its definition.Some terms may not be used a.Cash conversion cycle b.Cost of capital c.Days in inventory d.Days in payables e.Days sales outstanding f.Lock box g.Pledged accounts receivable h.Working capital management -The management of current assets and current liabilities.

Match the term with its definition.Some terms may not be used a.Accounting return on investment technique b.Capital budgeting analysis c.Discounted cash flow techniques d.Internal rate of return e.Net present value f.Payback period technique g.Working capital cycle h.Working capital management -A capital budgeting technique that compares expected average annual after-tax profits to the average book value of an investment.

Average annual after-tax profits per year divided by the average book value of the investment equals:

Under the NPV method, the rate of return required to satisfy the business's investors is the:

Net cash flow and revenue are:

Many small business owners do not use discounted cash flow techniques.What are the reasons they do not?

Jane has started a gift basket company that specialises in regional products.Several companies use her baskets for the holidays, to welcome new employees and for their sales staff to use as gifts for corporate clients.Because she noticed her average collection period from last quarter to this quarter had doubled to 60 days, she then realised the company's average age in inventory has increased from 30 to 40 days and the average payment period dropped from 35 to 30 days.After calculating each quarter's cash conversion cycles, what do the changes indicate?

Discuss cash flow characteristics of businesses that have a cash culture in relation to the recession.

Match the term with its definition.Some terms may not be used a.Accounting return on investment technique b.Capital budgeting analysis c.Discounted cash flow techniques d.Internal rate of return e.Net present value f.Payback period technique g.Working capital cycle h.Working capital management -Capital budgeting techniques that compare the present value of future cash flow with the cost of the initial investment.

What are key issues in managing accounts payable?

Discuss the importance of working capital management and how it relates to the working-capital cycle of a small business.

Which statement is true concerning inventory management programmes?

During the cash conversion cycle, the business has the benefit of the financing provided by the supplier.

Match the term with its definition.Some terms may not be used a.Cash conversion cycle b.Cost of capital c.Days in inventory d.Days in payables e.Days sales outstanding f.Lock box g.Pledged accounts receivable h.Working capital management -The time required to convert paid-for inventory and accounts receivable into cash.

IRR:

Every component of working capital has two dimensions: interest and money.

Accounts receivable financing:

Accounting profits are identical to actual cash flows.

"How long will it take to recover the original investment outlay?" is answered using:

Match the term with its definition.Some terms may not be used a.Accounting return on investment technique b.Capital budgeting analysis c.Discounted cash flow techniques d.Internal rate of return e.Net present value f.Payback period technique g.Working capital cycle h.Working capital management -The present value of expected future cash flows less the initial investment outlay.