Exam 14: Working Capital Management and Policies

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?

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?

Suppose that Darlene's Donuts has annual sales of $200,000; cost of goods sold of $90,000; average inventories of $4,000; average accounts receivable of $10,000; and an average accounts payable balance of $7,000. Assuming that all of Darlene's sales are on credit, what will be the firm's cash cycle?

All of the following are examples of carrying costs EXCEPT:

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

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?

To trace cash flows through the firm's operations, we must measure which of the following? (It is the time necessary to acquire raw materials, turn them into finished goods, sell them, and receive payment for them.)

If a firm has a cash cycle of 71 days and an operating cycle of 139 days, what is its average payment period?

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

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?

Team Sports Industries has a cash balance of $60,000; accounts payable of $40,000; inventory of $100,000; accounts receivable of $110,000; notes payable of $80,000; and accrued wages and taxes of $10,000. 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 is NOT one of the five basic elements of the kaizen approach of productivity improvement?

If the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare:

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

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?

Rose N More Resources faces a smooth annual demand for cash of $50 million; incurs transaction costs of $350 every time they sell marketable securities, and can earn 5.2 percent on their marketable securities. What will be their optimal cash replenishment level?

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 10 days and an operating cycle of 43 days, what is its average payment period?

All of the following are the different types of float the firm may experience in its collections EXCEPT: