Exam 17: Cash,receivables,and Inventory Management

Flashbinder Guitars,Inc.is negotiating with the bank for a lockbox system that is expected to reduce check collection time by 4 days.Flashbinder Guitars' average check size is $1,200 and any funds freed up by the new system will be invested in a money-market account that is currently paying 2.5% annually.What is the most Flashbinder Guitars should be willing to pay the bank for the lockbox service,assuming the bank charges a per-check processing fee?

Money-market mutual funds are diversified portfolios of short-term,high-grade debt instruments.

The purpose of work-in-process inventory is to ensure that machine failures and work stoppages in one operation do not affect other operations.

Define float and its origins in the cash management process (that is,mail processing and transit).

A flower shop is trying to determine the optimal order quantity of the wicker baskets that it places many of its arrangements in.The store thinks it will sell 2000 of these baskets over the next year.The baskets cost the shop $2.00 each.The carrying cost of the baskets is $0.15 each per year.It costs the shop $8.00 to order. a.What is the economic order quantity? b.What is the total cost for ordering the baskets once a year? Four times a year?

Which of the following is generally under the control of the financial manager?

Determination of safety stock involves a trade-off between the risk of a stock-out and increased costs of carrying additional inventory.