Exam 14: Working Capital Management and Policies

If a firm starts selling its accounts receivable to a factor, how will the firm's cash cycle change?

Suppose your firm is seeking a five-year, amortizing $900,000 loan with annual payments and your bank is offering you the choice between a $950,000 loan with a $50,000 compensating balance and a $900,000 loan without a compensating balance. If the interest rate on the $900,000 loan is 9.5 percent, how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

If a firm has a cash cycle of 32 days and an operating cycle of 52 days, what is its payables turnover?

Drawing, Inc. has sales of $860,000 and cost of goods sold of $450,000. The firm had a beginning inventory of $50,000 and an ending inventory of $59,000. What is the length of the days' sales in inventory?

Betty Boop has saved enough money to go back to grad school. She is planning to put the money in a money market account where it will earn 2.5 percent. If she anticipates slowly drawing the money out over the course of her time in grad school at a constant rate of $29,000 per year, but is charged a commission of $7.95 every time she sells shares, how much should she take out of the mutual fund at a time?

Which of these is the period of time after a check has been written, but not yet cleared and deposited?

PB&J Company has sales of $900,000 and cost of goods sold of $450,000. The firm had a beginning inventory of $70,000 and an ending inventory of $65,000. What is the length of the days' sales in inventory?

Which of these is the requirement of the firm to keep a certain percentage of the borrowed money deposited in the firm's bank accounts, whereby the bank agrees to lend money to the firm?

If the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare

Which of the following is the technique for reducing collection float by having funds sent to several geographically situated regional banks and then transferring to a main concentration account in another bank?

Suppose your firm is seeking a 3-year, amortizing $300,000 loan with annual payments and your bank is offering you the choice between a $305,000 loan with a $5,000 compensating balance and a $300,000 loan without a compensating balance. If the interest rate on the $300,000 loan is 8 percent, how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

All of the following are the different types of float the firm may experience in its collections EXCEPT

Would it be worth it to incur a compensating balance of $2,000 in order to get a 1.5-percent-lower interest rate on a 1-year, pure discount loan of $100,000?

PBJ Enterprises estimates that it takes, on average, three days for their customers' payments to reach them, three days for the payments to be processed and deposited by their bookkeeping department, and three more days for the checks to clear once they're deposited. What is their collection float?

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity, the firm is said to follow a

Suppose that Professional Photography has annual sales of $900,000, cost of goods sold of $450,000, average inventories of $5,000, average accounts receivable of $40,000, and an average accounts payable balance of $20,000. Assuming that all of Professional's sales are on credit, what will be the firm's cash cycle?

B&B Cos. has sales of $732,000 and cost of goods sold of $323,000. The firm had a beginning inventory of $48,000 and an ending inventory of $39,000. What is the length of the days' sales in inventory?

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its payables turnover?

PNB Cos. has sales of $250,000 and cost of goods sold of $120,000. The firm had a beginning inventory of $19,000 and an ending inventory of $13,000. What is the length of the days' sales in inventory?

CJ Enterprises estimates that it takes, on average, three days for their customers' payments to reach them, one day for the payments to be processed and deposited by their bookkeeping department, and two more days for the check to clear once they're deposited. What is their collection float?