Exam 14: Working Capital Management and Policies

Suppose that Dunn Industries has annual sales of $2.5 million, cost of goods sold of $1,850,000, average inventories of $1,900,000, and average accounts receivable of $660,000. Assuming that all of Dunn's sales are on credit, what will be the firm's operating cycle?

Which of these is a short-term loan secured by a company's assets?

The optimal cash replenishment level will decrease with all of the following changes EXCEPT:

Joe's Burgers would like to maintain their cash account at a minimum level of $300,000, but expects the standard deviation in net daily cash flows to be $20,000; the effective annual rate on marketable securities to be 5.2 percent per year; and the trading cost per sale or purchase of marketable securities to be $22.55 per transaction. What will be their optimal upper cash limit?

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease, how will the firm's needs for net working capital react?

Happy Feet would like to maintain their cash account at a minimum level of $75,000, but expects the standard deviation in net daily cash flows to be $5,000; the effective annual rate on marketable securities to be 7 percent per year; and the trading cost per sale or purchase of marketable securities to be $150 per transaction. What will be their optimal cash return point?

Imagine a firm has a temporary surplus of cash meant to fund an expansion project in the next nine months. Which of the following statements is correct?

Hollywood Shoes would like to maintain their cash account at a minimum level of $50,000, but expects the standard deviation in net daily cash flows to be $4,000; the effective annual rate on marketable securities to be 6 percent per year; and the trading cost per sale or purchase of marketable securities to be $100 per transaction. What will be their optimal cash return point?

Which of the following is NOT one of the five basic elements of the kaizen approach of productivity improvement?

Which of the following is NOT an example of an inventory loan?

If a firm has a cash cycle of 25 days and an operating cycle of 80 days, what is its payables turnover?

The operating cycle will decrease with all of the following changes EXCEPT:

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

Which of the following is a checking account that the firm sets up so that the bank agrees to automatically transfer funds from an interest-bearing account to pay off any checks presented?

Would it be worth it to incur a compensating balance of $2,000 in order to get a 1.5-percent-lower interest rate on a 1-year, pure discount loan of $100,000?

Why would a firm ever use short-term debt to finance permanent current assets?

Which of the following is defined as the cost or forgone opportunity of using an asset already in use by the firm, or a person already employed by the firm, in a new project?

Which of the following is NOT one of the "five C's" of credit analysis?

If a firm has a cash cycle of 30 days and an operating cycle of 92 days, what is its average payment period?

What must the rate be less than to be worth it to incur a compensating balance of $2,000 in order to get a 2 percent lower interest rate on a one-year, pure discount loan of $50,000?