Exam 30: Working Capital Management

Terry's Place is currently experiencing a bad debt ratio of 4 percent. Terry is convinced that, with looser credit controls, this ratio will increase to 8 percent; however, she expects sales to increase by 10 percent as a result. The cost of goods sold is 80 percent of the selling price. Per $100 of current sales, what is Terry's expected profit under the proposed credit standards?

The High-Rise Building Company uses 400,000 tons of stone per year. The carrying costs are $100/ton. The cost per order is $500. Calculate the optimal annual order costs.

Bankers' acceptances are used in overseas trade.

What are short-term tax-exempts?

The following is (are)the main method(s)that firms use to send and receive money electronically:

The High-Rise Building Company uses 400,000 tons of stone per year. The carrying costs are $100/ton. The cost per order is $500. Calculate the economic order quantity per order.

The High-Rise Building Company uses 400,000 tons of stone per year. The carrying costs are $100/ton. The cost per order is $500. Calculate the optimal number of orders per year.

Suppose you purchase goods on terms of 1/10, net 30. Taking compounding into account, what annual rate of interest is implied by the cash discount? (Assume a year has 365 days.)

A commercial draft is simply an order to pay.

A repurchase agreement occurs when

Lockbox systems are used to speed up collections.

Companies frequently use information from the following sources when conducting their credit analysis: I.financial statement supplied by the customer; II.payment history supplied by other firms; III.payment history supplied by banks

Which of the following countries is the heaviest user of checks?

Firms that receive a large volume of checks use the following to speed up availability of funds:

Factoring refers to

Discuss two important ways of speeding up collection.

When a firm grants credit to a customer, this gives rise to a(n) I.accounts receivable II.cash on delivery (COD) III.cash before delivery (CBD)

The discount on a 91-Treasury bill is 5.65 percent. What is the annually compounded rate of return? (Assume a 360-day discount basis.)

The following are electronic funds transfer systems available in the United States except

Concentration banking is used to slow down disbursements.