Exam 22: Working Capital Management

Instruction 22.1: Use the information to answer following question(s). SureDrip Irrigation Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to SureDrip is available at an annual rate of 9.6%. SureDrip has just purchased $400,000 of plastic chips from Sun Chemical. -Refer to Instruction 22.1. What is the amount of money SureDrip will save on accounts payable if they accept the discount?

A free-trade zone allows the user to

Polaris Corporation (US) has bid a price on a project for a Korean firm, but the Korean firm has not yet placed an order. This portion of the operating cycle is best described as the

The period in the cash cycle where the customer places the order, and the firm determines what materials for manufacture are not in inventory is called the ________ period.

Amundsen of Norway receives raw materials from their corporate parent in the U.S. with payment terms of net 60 days. Most of their sales are to firms in Norway where normal payment terms are net 30 days. This causes a problem for the subsidiary with working capital management because

The accounts payable period of the operating cycle

In principle, the firm tries to minimize its NWC balance.

Domestic sales are almost always denominated in the local currency, but international sales may be denominated in

Instruction 22.1: Use the information to answer following question(s). SureDrip Irrigation Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to SureDrip is available at an annual rate of 9.6%. SureDrip has just purchased $400,000 of plastic chips from Sun Chemical. -Refer to Instruction 22.1. What is the effective annual interest cost of supplier financing offered by Sun Chemical?

For disbursement purposes, it is to the benefit of the firm to minimize float.

________ is the process that cancels via offset all, or part, of the debt owed by one entity to another related entity.

Which of the following statements is true?

________ is NOT an advantage provided to MNEs by a central depository.

The Clearing House Interbank Payment System (CHIPS) is

In a two-country, two-currency international operation, an affiliate in country "A" needing more of its own currency can

An organizational structure employed by an MNE to reduce its use of bank lending for the support of operations is

One possible definition of net working capital (NWC) provided by your authors is

The Society for Worldwide Financial Telecommunications (SWIFT) is an interbank communications system that carries over 1.0 billion messages per year.

A foreign banking office that is separately incorporated in the host country is