Exam 19: Working Capital Management

ALT had $25 million in sales last year.Its cost of goods sold was $15 million and its average inventory balance was $3 million.What was its average days of inventory?

Which of the following money market investments is a draft written by the borrower and guaranteed by the bank on which the draft is drawn? It is typically used in international trade transactions.The borrower is an importer who writes the draft in payment for goods.

Your firm purchases goods from its supplier on terms of 2/10,net 40.The effective annual cost to your firm if it chooses not to take advantage of the trade discount offered and stretches the accounts payable to 60 days is closest to:

The categorization of a firm's accounts by the number of days they have been on the firm's books is called a(n)

What is a firm's operating cycle?

A firm had sales of $32 million,and,on average,takes 41 days to collect on its sales.What is the average daily amount of the firm's accounts receivable?

What is the collection float?

A firm offers its customers 3/5 net 25.What is the cost of trade credit to a customer who chooses to pay on day 25?

Working capital alters a firm's value by affecting its free cash flow.

Your firm purchases goods from its supplier on terms of 2/20 net 60.The effective annual cost to your firm if it chooses not to take advantage of the trade discount offered is closest to:

Brilliant Balloons,a party balloon manufacturer,buys latex on credit on September 1.It processes this latex to make balloons on September 6 and pays cash for the latex on September 14.On September 19 it sells the balloons to a party supply retailer,and on October 5 receives cash payment for this sale.What is the length of the operating cycle in this case?

ABX corporation had sales of $47.6 million this year and an average accounts receivable of $6.3 million per day.Its credit terms specify "1/10 net 30." On average,how long does it take to collect on its sales?

A firm decides to stretch its accounts payable,resulting in an effective annual cost of credit of 22.4%,under terms of 3/15 net 30.When is the firm paying its accounts payable?

What is "just-in-time" inventory management?

Which of the following is/are direct costs associated with inventory? I.Acquisition costs II)Carrying costs III)Order costs

A firm had sales of $8 million,and,on average,takes 33 days to collect on its sales.What is the average daily amount of the firm's accounts receivable?

Franklin Industries has a current net working capital of $2.5 million.It expects that this will grow at a rate of 3.5% annually forever.If it could slow that growth to 3% per year,how would that affect the value of the firm,given that it has a cost of capital of 11%?

Jerome Industries has inventory days of 15,accounts receivable days of 33,and a cash conversion cycle of 41 days.What is its accounts payable days?

The three steps in establishing a credit policy are establishing credit standards,establishing credit terms,and establishing a collection policy.

Which of the following best describes the collection float?