Exam 19: Working Capital Management

Your firm purchases goods from its supplier with a discount of 1%,and a discount period of 15 days.If the effective annual cost of forgoing the discount is 15.8%,what is the length of the credit period?

Macrae Products,a manufacturer of building products,buys raw gypsum on credit on May 16.It processes this gypsum to make dry plaster powder on May 20 and pays cash for the raw gypsum on May 30.On June 7 it sells the dry plaster powder to a chain of hardware stores,and on June 21 receives cash payment for this sale.What is the length of the cash cycle in this case?

The cash conversion cycle (CCC)is defined as:

Which of the following are the "5 Cs of Credit"?

ALT had $25 million in sales last year.Its cost of goods sold was $15 million and its average inventory balance was $3 million.What was its average days of inventory?

Your firm purchases goods from its supplier on terms of 2/20 net 60.The effective annual cost to your firm if it chooses not to take advantage of the trade discount offered is closest to:

Monroe Electronics' projected net income and free cash flows are given above in thousands of dollars.Monroe expects their net income and increases in net working capital to increase by 6% per year.If Monroe were able to reduce its annual increase in working capital by 15% without affecting any other part of the business adversely,what would be the effect of this reduction on Monroe's value,given a cost of capital of 11%?

Working capital alters a firm's value by affecting its free cash flow.

Which of the following is/are direct costs associated with inventory? I.Acquisition costs

The amount of cash a firm is required to hold in its bank account to pay for services the bank performs is known as the:

Jerome Industries has inventory days of 48,accounts receivable days of 21,and accounts payable days of 30.What is its cash conversion cycle?

SwenCorp had sales of $154 million this year and an average accounts receivable of $18 million per day.Its credit terms specify "2/14 net 40." On average,how long does it take to collect on its sales?

Which of the following is a firm's cash cycle?

Your firm purchases goods from its supplier with a discount period of 10 days,and a credit period of 30 days.If the effective annual cost of forgoing the discount is 44.59%,what is the amount of the discount?

Which of the following best describes the collection float?

Cromwell Incorporated has the information shown above on its annual Income Statement and Balance Sheet (all numbers shown are in thousands).What is Cromwell's cash conversion cycle?

Which of the following money market investments is a short-term,unsecured debt obligation issued by a large corporation? The minimum denomination is $25,000,but most have a face value of $100,000 or more.

Jerome Industries has a cash conversion cycle of 73 days,accounts receivable days of 43,and accounts payable days of 25.What is its inventory days?

Lionheart Inc.has the information shown above on its annual Income Statement and Balance Sheet (all numbers shown are in thousands).What is Lionheart's cash conversion cycle?

What is the effective annual cost of credit terms of 2/20,net 60,if the firm stretches the accounts payable to 80 days?