Exam 14: Working Capital Management and Policies

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

BOGO Shoes would like to maintain their cash account at a minimum level of $100,000, but expects the standard deviation in net daily cash flows to be $7,000; the effective annual rate on marketable securities to be 6.5 percent per year; and the trading cost per sale or purchase of marketable securities to be $175 per transaction. What will be their optimal cash return point?

If a firm has a cash cycle of 32 days and an operating cycle of 67 days, what is its payables turnover?

If a firm has a cash cycle of 55 days and an operating cycle of 150 days, what is its payables turnover?

The area of management concerned with designing and overseeing the process of production is which of the following?

The inventory order quantity that minimizes total holding and ordering costs is which of the following?

Suppose that LilyMac Photography has annual sales of $290,000; cost of goods sold of $155,000; average inventories of $3,500; average accounts receivable of $21,000; and an average accounts payable balance of $10,000. Assuming that all of LilyMac's sales are on credit, what will be the firm's cash cycle?

Scribble, Inc. has sales of $100,000 and cost of goods sold of $75,000. The firm had a beginning inventory of $20,000 and an ending inventory of $22,000. What is the length of the days' sales in inventory?

Which of the following current asset financing policies reflects the firm financing the seasonally-adjusted average level of asset demand with long-term debt and equity enabling it to use both short-term financing and short-term investing as needed?

Scribble, Inc. has sales of $80,000 and cost of goods sold of $64,000. The firm had a beginning inventory of $10,000 and an ending inventory of $12,000. What is the length of the days' sales in inventory?

What is the difference between a lockbox system and concentration banking?

Betty Boop has saved enough money to go back to grad school. She is planning to put the money in a money market account where it will earn 2.5 percent. If she anticipates slowly drawing the money out over the course of her time in grad school at a constant rate of $29,000 per year, but is charged a commission of $7.95 every time she sells shares, how much should she take out of the mutual fund at a time?

JohnBoy Industries has a cash balance of $59,000; accounts payable of $139,000; inventory of $115,000; accounts receivable of $220,000; notes payable of $175,000; and accrued wages and taxes of $23,000. How much net working capital does the firm need to fund?

If a firm's inventory ratio increases, what will happen to the firm's operating cycle?

Which of the following will decrease the operating cycle?

If a firm has a cash cycle of 41 days and an operating cycle of 76 days, what is its average payment period?

Rose Axels faces a smooth annual demand for cash of $8 million; incurs transaction costs of $200 every time they sell marketable securities; and can earn 3.8 percent on their marketable securities. What will be their optimal cash replenishment level?