Exam 15: Managing Working Capital

Marketable securities are held primarily to meet:

Inventory administration is primarily a financial management function.

"Investor spoofing" occurs when firms take actions at the end of their fiscal year (or sometimes toward the end of a quarter) to make themselves appear to be more profitable or financially healthy.

The time between when a payee sends payment and the funds are credited to the payee's bank account is called the:

The time it takes between when materials are ordered and cash is collected from receivables is referred to as the:

An increase in the cash conversion cycle would lead to an increase in the firm's short-term needs and financing costs.

By multiplying the average sales per day times the inventory conversion period, the inventories investment amount can be determined.

More efficient management of working capital assets will lessen the firm's needs for financing.

The operating cycle can be reduced by lengthening the accounts payable period.

Working capital is essentially a firm's current assets and consists of cash, accounts receivable, inventories, plant and equipment.

The delay that occurs when funds are sent by a payer to a payee.

When determining the operating cycle, which of the following components reduce the length of the cycle?

Which of the following would not be a characteristic of commercial paper?

The federal funds rate is normally several points lower than the T-bill rate.

Lowering a firm's credit standards or customer credit quality will cause the average collection period to lengthen.

The goal of a company's cash management policy is to

Because commercial paper rates are typically below U.S. Treasury bill rates, they are a valuable short-term financing source for high quality business firms.

Processing float is the delay in transferring funds between payer and payee because of the banking system check-clearing processes.

Which one of the following activities is not a major component of the operating cycle?

BP has an average age of inventory of 70 days, an average collection period of 45 days, and an average payment period of 30 days. Based on this information, BPs cash conversion cycle is ________ days.