Exam 13: The Management of Working Capital

Calculate the operating cash cycle if the inventory turnover period is 21 days, the debtor's turnover period is 37 days and the creditor turnover period is 40 days.

A firm has daily credit sales of $50,000, and its average collection period is 50 days. Its average accounts receivable balance is:

Which statement concerning the operating cash cycle is true?

What is an assumption of the economic order quantity model?

Extending the credit period granted, with all other components of the credit policy remaining unchanged, will most likely cause:

Which of the following is not a procedure or technique for managing inventory?

Which business is likely to have the heaviest investment in working capital?

A company wishes to reduce the amount of working capital it requires to finance its operations. Which of the following would be the least effective way of reducing working capital requirements?

Use the information below to answer the following questions Aqua Ltd has forecast the yearly demand for its product as 5,000 units. 100 units of material must be used to produce the product. The cost of placing a single order for raw materials is $20, and the cost of holding one unit of material is $0.40 a year. -Refer to the information above. How often should the company place an order?

Total purchases are $150,000 and credit purchases are 80% of total purchases. If accounts payable at the beginning of the period are $15,000 and at the end of the period are $13,000, the average settlement period for accounts payable, in days, is:

What is the formula for the average inventory turnover period in days?

Which of the following is the most useful tool for managing cash?

What does it mean if inventory turnover changes from 4 times a year to 5 time a year?

Which of these is not a way in which the length of the operating cash cycle can be reduced?

Which statement is not true?

Violet Pty Ltd usually takes 50 days to pay its suppliers. In order to encourage prompt payment, supplier T offers Violet Pty Ltd a 1.5% discount for payment within 10 days. What is the annual percentage cost of the discount to Violet Pty Ltd?

If sales are $950,000, the cost of sales is $600,000 and average inventory is $65,000, the average time taken to sell inventory in days is:

Wonderland has a plant that manufactures computer chips. Expected demand for these chips in March 2018 is 52,000 units. Wonderland estimates the cost per purchase order to be $25. The monthly holding cost for one chip is 5c. REQUIRED: a)i)Compute the economic order quantity for the chips. ii)Compute the number of orders in March 2018. b)List the motives for holding cash in a business. c)Name at least four factors that influence the length of the credit period in a business.

When trying to assess the credit standing of a customer, a financial analyst could use which of the following sources?

The operating cash cycle is measured as: