Exam 14: Working Capital Management and Policies

Suppose that Farrah's Hair Care has annual sales of $100,000, cost of goods sold of $65,000, average inventories of $2,000, and average accounts receivable of $5,000. Assuming that all of Farrah's sales are on credit, what will be the firm's operating cycle?

Which of the following is NOT a reason for holding cash?

If a firm has a cash cycle of 32 days and an operating cycle of 52 days, what is its payables turnover?

Which of the following is the best description of the operating cycle?

"The net amount of current assets that the firm has to fund, above and beyond those that someone else funds for them" is referred to as:

What must the rate be less than to be worth it to incur a compensating balance of $20,000 in order to get a 2 percent lower interest rate on a one-year, pure discount loan of $200,000?

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?

Which of these is the period of time after a check has been written, but not yet cleared and deposited?

KJ Enterprises estimates that it takes, on average, three days for their customers' payments to reach them, one day for the payments to be processed and deposited by their bookkeeping department, and two more days for the checks to clear once they're deposited. What is their collection float?

All of the following are the different types of float the firm may experience in its collections 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 18 days and an operating cycle of 34 days, what is its payables turnover?

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity, the firm is said to follow a:

B&O Cos. has sales of $850,000 and cost of goods sold of $490,000. The firm had a beginning inventory of $69,000 and an ending inventory of $54,000. What is the length of the days' sales in inventory?

Elle Mae Industries has a cash balance of $50,000; accounts payable of $150,000; inventory of $190,000; accounts receivable of $250,000; notes payable of $210,000; and accrued wages and taxes of $40,000. 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 57 days, what is its average payment period?

Painting, Inc. has sales of $400,000 and cost of goods sold of $275,000. The firm had a beginning inventory of $42,000 and an ending inventory of $38,000. What is the length of the days' sales in inventory?

If a firm has a cash cycle of 30 days and an operating cycle of 64 days, what is its average payment period?

Suppose your firm is seeking a 7-year, amortizing $100,000 loan with annual payments and your bank is offering you the choice between a $110,000 loan with a $10,000 compensating balance and a $100,000 loan without a compensating balance. If the interest rate on the $100,000 loan is 7 percent, how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?