Exam 15: Managing Working Capital

Increases in the cash conversion cycle will lower the firm's short-term financing needs.

The operating cycle measures the time between when a firm pays its suppliers for inventory and when it collects cash from customers on a sale of the finished product.

If a firm purchases materials on credit and thus has accounts payable, its cash conversion cycle will be:

Which of the following would not normally be discussed when describing a firm's operating cycle?

With regards to credit analysis, this indicates the adequacy of owners' equity relative to existing liabilities as the underlying support for creditworthiness.

The estimated cash inflows are affected by the sales forecast and customer payment patterns.

Theoretically, the transactions demand for cash could be reduced to zero.

U.S. Treasury bills are sold at a discount through competitive bidding in an annual auction.

Costs of owning raw materials, such as financing, storage, and insurance, need to be balanced against other items on the balance sheet.

Business firms hold cash and marketable securities for which of the following reasons or motives?

BP has an average age of inventory of 60 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.

Which one of the following asset accounts is not a part of a firm's working capital?

A credit bureau is an institutions that obtain credit information about business firms and individuals.

With regards to credit analysis, this refers to the ability to pay bills and often involves an examination of liquidity ratios.