Exam 15: Working Capital and Current Assets Management

Table 15.3 -Ace's Business Forms has compiled several factors relative to its financing mix. The firm pays 8 percent on short-term funds and 10 percent on long-term funds. The firm's monthly current, fixed, and total asset requirements for the previous year are summarized in Table 15.3. Determine: (a) the monthly permanent funds requirement (b) the monthly average seasonal funds requirement (c) the annual financing costs (aggressive strategy) (d) the annual financing costs (conservative strategy)

Other factors remaining constant, an increase in the average payment period will result in ________.

The ________ is an inventory management technique that compares production needs to available inventory balances and determines when orders should be placed for various material inputs.

Disbursement float results from the delay between the time that a payer or customer deducts a payment from its checking account ledger (disburses it) and the time that a payee or vendor actually receives these funds in a spendable form.

Which of the following elements is required for the calculation of cash conversion cycle?

In the EOQ model, ________ costs are the variable costs per unit of holding an item of inventory for a specified time period.

As credit standards are relaxed, sales are expected to increase and the investment in accounts receivable is expected to decrease.

A firm has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days. The firm's cash conversion cycle is ________ days.

Assuming that the level of total assets remains unchanged, the effect of a decrease in the ratio of current assets to total assets is an increase in a firm's risk of insolvency.

Table 15.6 A breakdown of Teffan, Inc.'s outstanding accounts receivable dated June 30, 2014 on the basis of the month in which the credit sale was initially made follows. The firm extends 30-day credit terms. -Accounts receivable over 90 days total ________. (See Table 15.6)

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.

Which of the following major variables should be considered when evaluating proposed changes in credit standards?

With the ACH (automated clearing house) credits, disbursement float is sacrificed because ACH transactions immediately draw down a company's payroll account on pay day.

Table 15.1 Irish Air Services has determined several factors relative to its asset and financing mix. (a) The firm earns 10 percent annually on its current assets. (b) The firm earns 20 percent annually on its fixed assets. (c) The firm pays 13 percent annually on current liabilities. (d) The firm pays 17 percent annually on long-term funds. (e) The firm's monthly current, fixed, and total asset requirements for the previous year are summarized in the table below: -The firm's monthly average seasonal funds requirement is ________. (See Table 15.1)

The economic order quantity (EOQ) is the order quantity which minimizes the carrying costs per unit per period.

Harry's Sheds has ten different items in its finished goods inventory. The average number of units held in inventory and the average unit cost are listed for each item. The firm uses an ABC system of inventory control. (a) Which items should be considered to be in the A category of an ABC system of inventory? (b) Which items should be considered to be in the B category of an ABC system of inventory?

A technique that provides an analyst with the information concerning the proportion of each type of account that has been outstanding for a specified period of time is called ________.

In analyzing an applicant's creditworthiness, a credit manager typically gives primary attention to two of the five C's of credit-collateral and condition-since they represent the most basic requirements for extending credit to an applicant.

Table 15.6 A breakdown of Teffan, Inc.'s outstanding accounts receivable dated June 30, 2014 on the basis of the month in which the credit sale was initially made follows. The firm extends 30-day credit terms. -An increase in collection efforts by a firm will result in ________ in sales volume, ________ in the investment in accounts receivable, ________ in bad debt expenses, and ________ in collection expenditures.

Commercial paper is a short-term loan issued by commercial banks that have variable yields based on size, maturity, and prevailing money market conditions.