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Exam 6: Working Capital Management

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Question 81

Multiple Choice

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Match the words with the term. -credit terms

A) 2 / 10, n / 30
B) trade receivables
C) aging
D) business credit
E) insurance policy

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Question 82

Multiple Choice

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What is the goal of managing working capital?

A) to reduce the level of trade and other payables
B) to improve relationships with customers
C) to accelerate the movement of retained earnings
D) to accelerate the cash flow cycle

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Question 83

True/False

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The economic ordering quantity formula takes into consideration factors such as lead time, reorder point and the stock arrival point.

The cost of managing a warehouse is part of the "ordering costs".

Match the words with the term. -net working capital

Calculations related to the existing credit policies. With existing credit terms, revenue is $ 1,000,000. If credit terms were relaxed, revenue would increase by 10 %. Profit before bad debts is estimated at 10 % of revenue. With existing credit terms, bad debts is .5 % of profit before bad debts and with new credit terms, bad debts would increase to 1.0 %. If the new credit terms were applied, trade receivables would increase from $200,000 to $240,000 -Return on investment is ____________________ %.

A company can improve its cash conversion efficiency ratio by extending its average collection period.

-Effective price is $ ________________________ .

Which of the following is NOT the mission of the credit manager?

-Net profit is $ ________________________.

Match the words with the term. -financing costs

-Interest on money is $ _____________________.

Who usually has responsibility for cash management?

A physical count of inventory provides the basic data necessary to perform an item analysis of the non-current assets.

The maximum cash disbursement period comes from two complementary management practices: liability management and ____________________ management.

Which of the following is an inventory management tool?

Match the words with the term. -trade receivables management

The main objective of ____________________ management is to maintain a reasonable amount of cash so that profitability is NOT affected and payment of short-term commitments is possible.

____________________ is a concept dealing with the amount of funds tied up in cheques that have been written but are still in process and have NOT yet been collected.

By offering 2 | 10, N | 30 credit terms to customers, a company automatically improves its profitability.