Exam 19: Working Capital Management

Genovese Fine Foods,a manufacturer of foodstuffs,buys durum wheat flour on credit on June 1.It processes this flour to make pasta on June 6 and pays cash for the flour on June 15.On June 22 it sells the pasta to a chain of supermarkets,and on July 3 receives cash payment for this sale.What is the length of the cash cycle in this case?

Your firm purchases goods from its supplier with a discount period of 10 days,and a credit period of 40 days.If the effective annual cost of forgoing the discount is 13%,what is the amount of the discount?

The amount of cash a firm holds to counter the uncertainty surrounding its future cash needs is known as a(n):

A firm offers its customers 1/7 net 21.What is the cost of trade credit to a customer who chooses to pay on day 21?

Gencom International has inventory days of 22,and accounts payable days of 37.If its cash conversion cycle is 28 days,what is Gencom's accounts receivable days?

The level of cash a firm holds is irrelevant; it can never be short of cash since a firm is able to raise new money instantly at a fair rate,while it can never have surplus cash since the firm can invest excess cash at a fair rate to earn a net present value (NPV)of zero.

Working capital management involves the management of all of a firm's assets and liabilities.

Franklin Industries has a current net working capital of $2.5 million.It expects that this will grow at a rate of 3.5% annually forever.If it could slow that growth to 3% per year,how would that affect the value of the firm,given that it has a cost of capital of 11%?

The amount of cash a firm needs to be able to pay its bills is sometimes referred to as a(n):

Jen Industries had sales of $32 million this year and an average accounts receivable of $0.8 million per day.On average,how long does it take to collect on its sales?

A firm that chooses a low-risk,restrictive credit policy will tend to have a larger investment in receivables.

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 4% per year.and has a cost of capital of 8%.Monroe wishes to achieve a 5% increase in firm value.If the rest of the business remains unchanged,what reduction in working capital increases would Monroe require in order to achieve this goal?

What is meant by the term 1.5/14 net 30?

Gencom International has inventory days of 12,and accounts receivable days of 33.If its cash conversion cycle is 21 days,what is Gencom's accounts payable days?

Use the table for the question(s)below. Luther Industries had sales of $980 million and a cost of goods sold of $560 million in 2006. A simplified balance sheet for the firm appears below: -Luther's Accounts Payable days is closest to:

What is a firm's operating cycle?

Which of the following money market investments is essentially a loan arrangement wherein a securities dealer is the "borrower" and the investor is the "lender"? The investor buys securities from the securities dealer,with an agreement to sell the securities back to the dealer at a later date for a specified higher price.

The categorization of a firm's accounts by the number of days they have been on the firm's books is called a(n):

What are the three reasons why a firm holds cash?

Collection float is the amount of time it takes for a firm to be able to use funds after a customer has paid for its goods.