Exam 19: Working Capital Management

TrinityApps Corporation (US)has bid a price on a project for a Korean firm, but the Korean firm has not yet placed an order. This portion of the operating cycle is best described as the:

In a country with a relatively high tax rate, it make sense the the MNE to reposition cash flows TO that country.

Instruction 19.1: Use the information to answer the following question(s). Sunny Manufacturing Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to Sunny Manufacturing is available at an annual rate of 9.6%. Sunny Manufacturing has just purchased $400,000 of plastic chips from Sun Chemical. -Refer to Instruction 19.1. What is the effective annual interest cost of supplier financing offered by Sun Chemical?

TABLE 19.1 Use the information to answer following question(s). TrinityApps Corporation Balance Sheet December 31, 20xx -Refer to Table 19.1. NWC currently makes up what percentage of total firm value for TrinityApps?

Political risk may motivate parent firms to require foreign subsidiaries to remit all locally generated funds above that required to internally finance growth in sales and planned capital expansions.

Of the following, which would NOT be a significant decision-making factor in a multinational firm's repositioning decision-making?

Which of the following actions will result in an increase in NWC?

In principle, the firm tries to minimize its NWC balance.

One possible definition of net working capital (NWC)provided by your authors is:

Instruction 19.1: Use the information to answer the following question(s). Sunny Manufacturing Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to Sunny Manufacturing is available at an annual rate of 9.6%. Sunny Manufacturing has just purchased $400,000 of plastic chips from Sun Chemical. -Refer to Instruction 19.1. Should Sunny Manufacturing take the discount offered by Sun Chemical?

Typically, the inventory period and the accounts receivable period at least partially overlap in the firms operating cycle.

TABLE 19.1 Use the information to answer following question(s). TrinityApps Corporation Balance Sheet December 31, 20xx -Refer to Table 19.1. If TrinityApps increases inventory by $10,000 and A/P also by $10,000, the net change in NWC is:

A disadvantage of a centralized cash management system is that managers will not be able to get the lowest average rate available for the firm. Instead, it misses out on the really low borrowing rates.

The constraints on repositioning of funds that occur when exchanging one currency for another are considered to be primarily political constraints.

The accounts payable period of the operating cycle:

Even though dividends are cash payments, firms typically must consider both cash flow and net income when making dividend distribution decisions.

A centralized depository benefits the firm primarily by: