Exam 14: Working Capital Management and Policies

Drawing, Inc. has sales of $860,000 and cost of goods sold of $450,000. The firm had a beginning inventory of $50,000 and an ending inventory of $59,000. What is the length of the days' sales in inventory?

If a firm has a cash cycle of 75 days and an operating cycle of 120 days, what is its payables turnover?

Which of the following will increase the operating cycle?

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and:

Which of the following is the technique for reducing collection float by having funds sent to several geographically situated regional banks and then transferring to a main concentration account in another bank?

All of the following are examples of carrying costs EXCEPT:

All of the following are different techniques that can be used to help firms reduce collection float EXCEPT:

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 upper cash limit?

PB&J Company has sales of $900,000 and cost of goods sold of $450,000. The firm had a beginning inventory of $70,000 and an ending inventory of $65,000. What is the length of the days' sales in inventory?

Everything else held constant, will an increase in the amount of inventory on hand increase or decrease the firm's profitability?

Suppose that Freddie's Fries has annual sales of $500,000; cost of goods sold of $375,000; average inventories of $9,000; average accounts receivable of $25,000; and an average accounts payable balance of $20,000. Assuming that all of Freddie's sales are on credit, what will be the firm's cash cycle?

Which of the following is NOT one of the Baumol Model's unrealistic assumptions?

Would it be worth it to incur a compensating balance of $15,000 in order to get a 2-percent-lower interest rate on a 1-year, pure discount loan of $1,000,000?

If a firm starts selling its accounts receivable to a factor, how will the firm's cash cycle change?

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its average payment period?

What effect does increasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

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

For most businesses, particularly smaller ones, the most common way to cover a short-term financing need is to apply at a bank for which of the following?

The financing policy that will result in investing in marketable securities when asset requirements are low is referred to as:

Which of these is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand?