Exam 22: Managing the Firms Assets

When dealing with large corporations, small companies are especially vulnerable to problems caused by slow collections.

Working capital management focuses on the attractiveness of long-run investment opportunities.

During the cash conversion period, the firm has the benefit of supplier financing.

The _____ is calculated by dividing the average annual after-tax profits per year by the average book value of the investment.

Day sales outstanding is computed by dividing a firm's accounts payable by daily credit sales.

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

In a healthy business, cash inflows and outflows are typically even.

Which of the following is a benefit of accounts receivable financing?

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

Match the term with its definition. -The management of current assets and current liabilities

In the past, many small business owners relied on quantitative analysis in making capital budgeting decisions.

Capital budgeting analysis helps managers make decisions about inventory investments.

Which of the following estimates the current value of the cash that will flow into a firm from a project in the future and deducts the amount of the initial outlay?

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 the

Small business owners' limited use of discounted cash flow (DCF) techniques has more to do with the nature of the small business itself than with their unwillingness to learn.

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

If two companies have the same amount of sales, why could one company still have more inventory than the other company?

Which of the following is a reason that a small firm would NOT use a discounted cash flow (DCF) technique in evaluating capital investments?

The average collection period is the number of days that a firm extends credit to its customers.

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