Exam 15: Working Capital and Current Assets Management

Controlled disbursing ________.

A firm has an average age of inventory of 101 days, an average collection period of 49 days, and an average payment period of 60 days. The firm's cash conversion cycle is ________ days.

The operating cycle is the length of time a firm's cash is tied up between payment for production inputs and receipt of payment from the sale of the resulting finished product.

Firms are able to reduce financing costs or increase the funds available for expansion by maximizing the amount of funds tied up in working capital.

A firm has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Its operating cycle is ________ days.

When managing accounts payable, a good strategy would be to ________.

Which of the following is true of changes in cash discount period?

A company's ________ are the procedures followed to collect accounts receivable when they come due.

Which of the following is true of collection float?

The conservative funding strategy is a strategy by which a firm finances at least its seasonal requirements, and possibly some of its permanent requirements, with short-term funds and the balance of its permanent requirements with long-term funds.

A credit applicant's ________ reflects its ability to repay the requested credit.

Other factors remaining constant, an increase in the average collection period will result in ________.

A decrease in the production time to manufacture a finished good will result in ________.

Under a conservative funding strategy, the firm funds both its seasonal and its permanent requirements with long-term debt.

When implementing the cash management strategies, a firm should avoid damaging a firm's credit rating by overstretching accounts payable.

________ involves the strategic use of mailing points and bank accounts to lengthen mail and clearing floats.

In the EOQ model, if the size of order increases, the ________.

Table 15.7 Fizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3 percent cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is $25,000 per film, variable cost per film is $18,750, and the average cost per film is $21,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year, that 75 percent of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5 percent of sales. The firm's required return on equal-risk investments is 20 percent. (Assume a 360-day year.) -What is the firm's marginal profit contribution from sales under the proposed plan of initiating the cash discount? (See Table 15.7)

An decrease in the current liabilities to total assets ratio will result in ________.

The ________ is the length of time from the point when raw materials are purchased on account to the point when payment is made to the supplier of the goods.