Exam 15: Working Capital and Current Assets Management

By increasing collection expenditures, a firm can decrease bad debt losses up to a point, beyond which bad debts cannot be economically reduced.

Receipts and disbursements management techniques are aimed at minimizing a firm's financing requirements by taking advantage of certain imperfections in the collection and payment system.

When a portion of a firm's fixed assets are financed with current liabilities, ________.

Table 15.2 The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent. -The firm's initial net working capital is ________. (See Table 15.2)

The purpose of managing current assets and current liabilities is to ________.

The basic strategies for determining the appropriate financing mix are ________.

The cost of marginal bad debts is found by multiplying a firm's opportunity cost by the difference between the level of bad debts before and after the relaxation of credit standards.

If a firm's credit period is decreased, the sales volume, the investment in accounts receivable, and the bad debt expenses can be expected to increase.

________ float results from the lapse between the time when a firm deducts a payment from its checking account ledger and the time when funds are actually withdrawn from its account.

In the EOQ model, if carrying costs increase while all other costs remain unchanged, the number of orders placed would be expected to increase.

The net effect of changes in a cash discount period is quite difficult to analyze because they are directly attributable to the three forces affecting a firm's investment in accounts receivable.

If the cash discount period is increased, a firm's investment in accounts receivable is expected to ________.

Which of the following instruments demonstrates the safety of principal characteristic common to marketable securities?

Which of the following is a nongovernmental issue?

Credit analysts usually analyze an applicant's creditworthiness by using the dimensions of credit such as character, capacity, capital, collateral, and conditions.

Because managing inventory is just like managing any other investment, decisions about the level of inventory should be guided by the effect of inventory levels on sales.

Table 15.2 The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent. -If the firm was to shift $7,000 of fixed assets to current assets, the firm's net working capital would ________, and the risk of not being able to meet current obligations would ________, respectively. (See Table 15.2)

A firm's financing requirements can be separated into ________.

In general, the greater a firm's current assets relative to its short-term obligations, the better able it will be to pay its bills as they come due.

Since its objective is to minimize inventory investment, a Just-in-Time (JIT) system uses no, or very little, safety stocks.