Exam 22: Managing the Firms Assets

Owen was surprised when he calculated the percentage annual interest rate on his accounts payable.He discovered that failure to take advantage of the discount offered by suppliers

The payback period technique measures how long it will take to recover the initial cash outlay and the total amount of interest unearned over the payback period as an opportunity cost.

If the net present value of a proposed investment is positive,

Nicholas wouild like to improve the management of his company's accounts payable.One metric he might find useful is:

Inventory management and accounts payable management are intertwined.

Dana produces fine chocolates for her retail shop which is open 6 days a week.The sales are $156,000 annually with a cost of goods sold of 45% of sales and inventory of 5%.Calculate the days in inventory and indicate any concerns for the shop considering the national average is 15 days.

Capital budgeting primarily involves short-term decisions on the part of management.

Long-term investments are the focus of

The main purpose of capital budgeting is to help managers make decisions about

Use of the accounting return on investment technique answers the question,"How long will it take to recover the original investment outlay?"

The payback period technique does not consider the time value of money.

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 -The rate of return a firm expects to earn on a project

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 -The present value of expected future cash flows less the initial investment outlay

Small business managers tend to overbuy inventory due to not understanding inventory management.

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 -Accounts receivable used as collateral for a loan

Working capital management

Average annual after-tax profits per year divided by the average book value of the investment equals

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 company holds inventory

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 compares expected average annual after-tax profits to the average book value of an investment

The payback period and accounting return on investment techniques