Exam 16: The Management of Working Capital

____ working capital arises from the seasonal or cyclical nature of a company's sales.

Compensating balances cannot normally be used for transactions.

When a firm factors its accounts receivable as opposed to pledging them, the firm will:

Lengthening the credit period is likely to result in all of the following except:

Which of the following is not a means for a bank to secure short-term loans made to a firm?

Which of the following factors does not directly affect the firm's investment in working capital?

Haverly offers its customers an effective interest rate of 24.33% on its terms of sale. They offer a 1% discount if payment is made within 5 days. Assuming a 365-day year, what terms of sale does Haverly use?

Discuss the idea of stretching payables clearly indicating the pros and cons of the idea.

Net working capital is the sum of all current assets.

The fundamental benefit of offering trade credit is more sales.

A revolving credit agreement:

Spontaneous financing exists because vendors and employees are not generally paid for their products and services immediately.

An expansion of inventory produces cash inflows from additional sales that are partially offset by additional carrying costs.

The term ____ refers to the assets and liabilities required to operate a business on a day-to-day basis.

The administrative reason for holding cash is to pay for emergency needs.

Incremental working capital needed to support seasonal peaks in sales is known as seasonal working capital.

A firm's credit policy:

Braebner Corp. orders 500,000 microchips per year at an average cost of $130.  The carrying cost of each chip is $25, and each order costs $150.  Compute Braebner's EOQ.

Which of the following is true of commitment fees?

A firm's financial managers should always attempt to set a credit policy that will result in no bad debts.