Exam 22: Managing the Firms Assets

Match the term with its definition.Some terms may not be used. a.Accounting return on investment technique b.Capital budgeting analysis c.Discounted cash flow techniques d.Internal rate of return e.Net present value f.Payback period technique g.Working capital cycle h.Working capital management -A capital budgeting technique that measures the amount of time it will take to recover the initial cash outlay of an investment

Management should be working continuously to shorten the working capital cycle.

A shortcoming of the accounting return on investment technique is that it is based on accounting profits rather than cash flows received.

Historically,many small business owners have relied on quantitative analysis in making capital budgeting decisions.

Factoring account receivables involves the business selling its accounts receivable to a finance company,and the finance company assumes any bad-debt risk.

Match the term with its definition.Some terms may not be used. a.Cash conversion period b.Cost of capital c.Days in inventory d.Days in payables e.Days sales outstanding f.Lock box g.Pledged accounts receivable h.Working capital management -The management of current assets and current liabilities

Batching may hold up receipts of customer payments.

The number of days,on average,that a firm is extending credit to its customers is called

Cash deposits during a month less checks written during the same period equal

Managing cash flow well will give a company a competitive edge over their competitors.

A advantage of the accounting return on investment technique is that it ignores the time value of money.

Accounting profits are identical to actual cash flows.

The third day in the working capital time line is

Net cash flow should be equated with net profit.

Net cash flow and revenue are

A firm's net cash flow may be determined by examining the company's bank account.

The terms 2/10,net 45 offer

Inventory is called a "necessary evil";it is "necessary" because

A firm's cost of capital is simply the interest rate it must pay on its loans.

Inventory is a concern only for manufacturing companies.