Exam 15: Working Capital and Current Assets Management

A ________ is not a specific security but an arrangement whereby a bank or security dealer sells specific marketable securities to a firm and agrees to repurchase the securities in the future.

The ________ inventory consists of all items currently in the production process.

In general, the more net working capital a firm has,

The credit applicant's ________ is the amount of assets the applicant has available for use in securing the credit.

When managing inventories, a good strategy is to increase inventory turnover by doing the following EXCEPT

Table 15.2 The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent. -The firm's initial net working capital is ________. (See Table 15.2)

A credit manager typically gives primary attention to ________ in extending credit to an applicant.

The major variables that should be considered when evaluating proposed changes in credit standards are all of the following EXCEPT

Table 15.5 Caren's Canoes is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15 percent from 300 canoes per year to 345 canoes per year. The average collection period is expected to increase to 40 days from 30 days and bad debts are expected to double the current 1 percent level. The price per canoe is $850, the variable cost per canoe is $650 and the average cost per unit at the 300 unit level is $700. The firm's required return on investment is 20 percent. -What is the net result of implementing the proposed plan? (See Table 15.5)

________ float is the time that elapses between the deposit of a check by the payee and the actual availability of funds. This component is attributable to the time required for a check to go through the banking system.

Collection float is experienced by the payer and is a delay in the receipt of funds.

Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer.

An increase in the current asset to total asset ratio has the effects of ________ on profits and ________ on risk.

The ease of salability of marketable securities refers to

Adong's Fishing Products is analyzing the performance of its cash management. On average, the firm holds inventory 65 days, pays its suppliers in 35 days, and collects its receivables in 15 days. The firm has a current annual outlay of $1,960,000 on operating cycle investments. Adong currently pays 10 percent for its negotiated financing. (Assume a 360 day year.) (a) Calculate the firm's cash conversion cycle. (b) Calculate the firm's operating cycle. (c) Calculate the daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days.

The portion of a firm's current assets financed with long-term funds may be called

Jia's Apple Farm uses 35 baskets each day to pack apples for shipping. It takes 5 days to receive a shipment of baskets after an order is placed and she would like a safety stock of 3 days in inventory. At what level of inventory should Jia's place an order for baskets?

In economic conditions characterized by a scarcity of short-term funds, a firm would best choose the ________ financing strategy.

The yields on Treasury bills are generally higher than those on any other marketable securities due to their virtually risk-free nature.

The ACH (automated clearing house) debits are preauthorized electronic withdrawals from the payer's account.