Exam 22: Managing the Firms Assets

Discounted cash flow techniques take into consideration that cash received today is more valuable than cash received at a later date.

Margaret has just sold merchandise to a small beauty salon and has given the salon 45 days to pay the invoice.She is at the beginning of

A firm's working capital cycle refers to the flow of cash to purchase and sell fixed assets.

The goal of the cash conversion period is convert paid-for inventory and accounts receivables into cash as quickly as possible.

The cash conversion period is the time period between ordering inventory and receiving cash for its sale.

The calculation for days in payables is very similar to days sales outstanding and days in inventory.

Improperly managed and uncontrolled stockpiling may greatly increase inventory-carrying costs and place a heavy drain on the funds of a small business.

Which question do all types of capital budgeting techniques try to answer?

A firm will have difficulty attracting investors if investments in the firm have internal rates of return below an investor's required rate of return.

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 number of days,on average,that a business takes to pay its accounts payable

Discuss the importance of working capital management and how it relates to the working-capital cycle of a small business.

The disadvantage of accounts receivable financing is the negative impact on cash flow.

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 number of days,on average,that a firm extends credit to its customers

Expenses occur when items are purchased;disbursements are the receipts made later for these expenses.

Revenue is recorded at the time a sale is made,but cash receipts are recorded when money actually flows into the firm.

Accounts receivable financing

The last step in managing inventory is to discover how long inventory has been at the company.

Carrie's decision to research a new product for her children's party business is considered an example of a capital budget decision.

Accounts receivable are sometimes called near cash because they can be converted to cash whenever a business needs to do so.

Tres has received a large contract and has taken a loan to buy inventory.Considering the timing of the loan,Tres may be ____________ to complete the contract.