Exam 16: Current Asset Management

Because poor credit-worthy customers may cause bad debt losses,credit sales to them should not be allowed.

A security is considered liquid if it can be sold,regardless of the time it takes to make the sale.

Fiesta Taco Company purchases 30,000 boxes of ground beef each year.It costs $50 to place each order and $10.00 per year for each box held as inventory. a.What is the average inventory held during the year? b.What is the economic order quantity for the ground beef? c.How many orders will be made each year?

Which of the following is the least liquid?

A lock-box system reduces

A treasury bill is a near-cash asset.

A flower shop is trying to determine the optimal order quantity of the wicker baskets that it places many of its arrangements in.The store thinks it will sell 2000 of these baskets over the next year.The baskets cost the shop $2.00 each.The carrying costs of the baskets is $0.15 each per year.It costs the shop $8.00 to order. a.What is the economic order quantity? b.What is the total cost for ordering the baskets once a year? Four times a year?

Which of the following factors determines the amount that a firm would have invested in accounts receivable?

Anticipatory buying occurs because of an anticipated decrease in interest rates.

John Maynard Keynes segmented a firm's demand for cash into the following motives:

The estimated value of reducing float by 1-day is one day's interest on the freed up sales.

If a firm extends 4/10,net 60-day terms of sale,what is the cost in terms of nominal APR? Assume a 360-day year.

Which of the following is not a category of inventory?

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

Lockbox arrangements may reduce mail float,processing float,and transit float.

In the EOQ model,the carrying cost on inventory should include the required rate of an investment in inventory.

The more difficult it is to estimate a firm's cash flow needs,the greater the need to carry higher precautionary balances.

Black Appliances is trying to determine the optimal order quantity for dryers for the next twelve months.Annual sales are expected to be 1,000,000 units at a retail price of $400 each.The cost of carrying dryers is $80 per year.Studies show that it costs Black $250 to prepare and receive an order.What is the EOQ?

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

Cash management system objectives include