Exam 15: Working Capital and Current Assets Management

In general, the more net working capital a firm has, ________.

Most firms employ ________ funding strategy if their sales and investments in operating assets are constant.

Treasury notes generate lower returns than U.S. Treasury bills.

The operating cycle is the recurring transition of a firm's working capital from cash to inventories and inventories to receivables and back to cash.

The cash conversion cycle of a firm is the difference between the number of days resources are tied up in the operating cycle and the average number of days the firm can delay making payment on the production inputs purchased on credit.

If a firm increases its current assets relative to total assets, ________.

Funds on deposit at commercial banks having variable maturities and yields based on size, maturity, and prevailing money market conditions are ________.

The cash conversion cycle is the total number of days in the operating cycle less the average payment period for inputs to production.

The aggressive funding strategy is a strategy by which a firm finances all projected funds requirements with long-term funds and uses short-term financing only for emergencies or unexpected outflows.

Which of the following is true of credit scoring?

In economic conditions characterized by short-term interest rates which exceed long-term interest rates, the financing strategy which would maximize profits is ________ strategy.

As the ratio of current assets to total assets increases, a firm's risk increases.

By efficiently managing a firm's operating and cash conversion cycles, the financial manager can maintain a high level of cash investment and thereby contribute toward maximization of share value.

Delaying the payment of accounts payable in order to improve cash management is known as ________.

Marketable securities are short-term, interest-earning, money market instruments that can easily be converted into cash.

________ are obligations of the U.S. Treasury with common maturities of 91 to 182 days and that have a strong secondary market.

A ________ is an unsigned check drawn on one of a firm's bank accounts and deposited into its account at another bank.

Tryst Energy Inc. has an average age of inventory of 65 days, an average collection period of 60 days and an average payment period of 65 days. The firm's total annual outlays for operating cycle investments are $3.65 million. Assuming a 365-day year, how much financing is required to support its cash conversion cycle?

To be truly marketable, a security must ________.

Jia's Apple Farm uses 35 baskets each day to pack apples for shipping. It takes 5 days to receive a shipment of baskets after an order is placed and she would like a safety stock of 3 days in inventory. At what level of inventory should Jia's place an order for baskets?