Exam 15: Working Capital and Current Assets Management

One of the key inputs to the final credit decision is a credit analyst's subjective judgment of a firm's creditworthiness since it can provide a better feel of a firm's operation than any quantitative figures.

The ________ is a technique that divides inventory into three groups, according to dollar investment.

Federal agency issues ________.

An applicant's capacity to repay its requested credit can be found by ________.

The more predictable a firm's cash inflows, the more net working capital it will need.

A firm expects to have funds of $150,000 idle for 60 days. If the firm could purchase marketable securities yielding 10 percent and pay brokerage fees of $1,500, the firm ________.

The aggressive financing strategy is risky in two aspects: a firm operates with a possibility of ________, and a firm has only a limited amount of ________ capacity.

Controlled disbursing involves the strategic use of mailing points and bank accounts to lengthen mail float and clearing float, respectively.

The ABC system is an inventory management technique for determining the optimal order quantity for an item of inventory.

Credit Scoring Policy Jia's Jewelry uses the credit scoring technique to evaluate retail applications. The financial and credit characteristics considered and weights indicating their relative importance in the credit decision are shown above. The firm's credit standards are to accept all applicants with credit scores of 85 or more, to extend limited credit to applicants with scores ranging from 75 to 84, and to reject all applicants below 75. The firm is currently processing two applicants. The scores of each applicant on each of the financial and credit characteristics are summarized above. Would you recommend either of these applicants for credit extension?

If a firm increases its cash discount period, the firm's investment in accounts receivable due to discount takers still getting cash discounts but paying later is expected to increase.

The ________ financing strategy requires a firm to pay interest on excess funds borrowed but not needed throughout the entire year.

The ________ is an inventory technique that takes into account various operating and financial costs to determine the order quantity for a specific inventory item.

A risk of the ________ financing strategy is unpredictable interest expense.

A firm's credit terms cover ________.

A firm has a cash conversion cycle of 60 days and average payment period of 40 days. The firm's operating cycle is ________ days.

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

Which of the following is an attribute of a banker's acceptance?

In exchange for the tailor-made maturity date provided by the repurchase agreement, a bank or security dealer provides a return slightly below than obtainable through outright purchase of similar marketable securities.

A ________ is a professionally managed portfolio of marketable securities and is sold in fractional parts.