Exam 17: Cash,receivables,and Inventory Management

If current interest rates are low,and therefore expected to increase in the future,a firm wanting to reduce its interest rate risk would hold debt with longer maturities.

The purpose of work-in-process inventory is to ensure that machine failures and work stoppages in one operation do not affect other operations.

Firms like to hold large stocks of cash since the risk of becoming insolvent is minimized.

Managing a firm's cash outflows through use of a "zero balance account" system offers all but which of the following benefits?

The speed of the collections process is determined by three types of float: mail float,processing float,and transit float.

Of the following EOQ model assumptions,the most limiting is

Centralized control over disbursements is assisted by which of the following cash management techniques?

All of the following are false EXCEPT

The interest earned on U.S.Treasury bills is subject to state and local income taxes.

Yields on various financial instruments tend to be positively correlated with maturity.

All of the following elements of a cash management program will likely contribute to an increase in the value of the firm EXCEPT

Total float consists of each of the following elements EXCEPT

Manfred Manufacturing is involved in the production of machine parts.The company uses 600,000 pounds of steel annually.The current purchasing cost for steel is $3.20 per pound.The carrying cost for inventory is 10 percent of the purchase price.The cost of ordering steel is $800 per order.The company has decided to maintain a safety stock of 15,000 pounds.The delivery time per order is 6 days.The company works 365 days a year. a.Determine the optimal EOQ. b.How many orders will be placed annually? c.What is the average inventory? d.What is the inventory order point? (That is,at what level of inventory should a new order be placed?) e.What is the company's total inventory costs for the year?

Generally,the least important motive for holding liquid assets for a typical company is the speculative motive.

Non-uniform demand can be accommodated in the EOQ model by allowing for non-uniform ordering costs.

Money market mutual funds are diversified portfolios of short-term,high-grade debt instruments.

In the EOQ model,carrying costs of inventory include

One method used to monitor the collections of accounts receivable is aging.

The decision to forgo the discount available to those customers who pay early has an advantage as well as a disadvantage.

Zero balance accounts permit centralized control over cash outflows while maintaining divisional disbursing authority.