Exam 14: Working Capital Management and Policies

The optimal cash replenishment level will decrease with all of the following changes EXCEPT

Dandee Lions, Inc. has a cash balance of $105,000, accounts payable of $290,000, inventory of $213,000, accounts receivable of $310,000, notes payable of $95,000, and accrued wages and taxes of $65,000. How much net working capital does the firm need to fund?

If a firm has a cash cycle of 25 days and an operating cycle of 80 days, what is its average payment period?

Would it be worth it to incur a compensating balance of $15,000 in order to get a 2-percent-lower interest rate on a 1-year, pure discount loan of $1,000,000?

Would it be worth it to incur a compensating balance of $9,000 in order to get a 0.70 percent lower interest rate on a 1-year, pure discount loan of $250,000?

Scribble, Inc. has sales of $100,000 and cost of goods sold of $75,000. The firm had a beginning inventory of $20,000 and an ending inventory of $22,000. What is the length of the days' sales in inventory?

Which of the following current asset financing policies reflects the firm financing the seasonally-adjusted average level of asset demand with long-term debt and equity enabling it to use both short-term financing and short-term investing as needed?

If a firm has a cash cycle of 71 days and an operating cycle of 139 days, what is its average payment period?

If a firm has a cash cycle of 18 days and an operating cycle of 29 days, what is its payables turnover?

If a firm has a cash cycle of 20 days and an operating cycle of 60 days, what is its payables turnover?

The operating cycle will decrease with all of the following changes EXCEPT

Which of the following is a checking account that the firm sets up so that the bank agrees to automatically transfer funds from an interest-bearing account to pay off any checks presented?

Which of the following current asset financing policies reflects the decision to finance the peaks of current assets with long-term debt and equity that provides the firm with a surplus of cash and marketable securities most of the time, except during peak asset demand?

HotFoot Shoes would like to maintain their cash account at a minimum level of $35,000, but expect the standard deviation in net daily cash flows to be $2,000, the effective annual rate on marketable securities to be 5 percent per year, and the trading cost per sale or purchase of marketable securities to be $210 per transaction. What will be their optimal cash return point?

Which of these is an entity who will buy accounts receivable before they are due on a discounted basis, with the spread between the discounted price and the receivable's face value providing them with the expected compensation for both the time value of money and for the expected level of defaults amongst the accounts receivable?

Which of the following actions will cause a firm's net working capital to increase?

All of the following are different techniques that can be used to help firms reduce collection float EXCEPT

Everything else held constant, will an increase in the amount of inventory on hand increase or decrease the firm's profitability?

Suppose that Tucker Industries has annual sales of $5 million, cost of goods sold of $2.78 million, average inventories of $1,125,000, and average accounts receivable of $500,000. Assuming that all of Tucker's sales are on credit, what will be the firm's operating cycle?

Which of the following is NOT a fundamental factor ignored by the target cash balance models?