Exam 15: Working Capital and Current Assets Management

Net working capital can be defined as the portion of the firm's current assets financed with long-term funds.

Controlled disbursing is a method of consciously anticipating the mail, processing, and clearing time involved with the payment process.

A popular extension of materials requirement planning is manufacturing resource planning II, which integrates data from numerous areas such as finance, accounting, marketing, engineering, and manufacturing using a sophisticated computer system.

The most stringent step in the collection process is

A firm has an average age of inventory of 101 days, an average collection period of 49 days, and an average payment period of 60 days. The firm's inventory turnover is ________.

Improvements to cash management include all of the following EXCEPT a reduction in

The costs associated with inventory can be divided into the following groups EXCEPT

Eurodollar deposits are deposits of currency that are not native to the country in which the bank is located.

Nonmanufacturing firms are more likely to have positive cash conversion cycles; they generally carry smaller, faster-moving inventories and often sell their products for cash.

A firm's credit terms specify the minimum requirements for extending credit to a customer.

A firm with a cash conversion cycle of 175 days can stretch its average payment period from 30 days to 45 days. This will result in a(n) ________ in the cash conversion cycle of ________ days.

Current liabilities can be viewed as

The most difficult set of accounts to predict are

An increase in the average payment period will result in ________ in the cash conversion cycle.

A firm has an operating cycle of 170 days, an average payment period of 50 days, and an average age of inventory of 145 days. The firm's average collection period is ________ days.

One aspect of risk associated with the aggressive strategy's maximum use of short-term financing is the fact that changing short-term interest rates can result in significantly higher borrowing costs as the short-term debt is refinanced.

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.

Ideally a firm would like to have a

Short-term financial management is concerned with management of the firm's current assets and current liabilities.

Table 15.7 Dizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3 percent cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is $25,000 per film, variable cost per film is $18,750 per film, and the average cost per film is $21,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year, that 75 percent of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5 percent of sales. The firm's required return on equal-risk investments is 20 percent. -What is the cost of the marginal cash discount? (See Table 15.7)