Chapter 16

Uses of cash can involve increasing a(n) ______ account.

1.) Non cash current asset 2.) Fixed asset

Receivables period equals _____ days divided by the receivables turnover.

365

The payables period equals ___ days divided by the payables turnover.

365

What does an average collection period of 57 mean?

Customers took, on average, 57 days to pay.

True or false: The collection cycle is the difference between disbursement and collection of cash.

False

True or false: The payables turnover equals the cost of goods sold divided by the average payables.

True

A flexible short-term financing strategy implies ______.

a relatively large pool of marketable securities cash surpluses

The two types of accounts receivable financing are ______ and ______.

assignment and factoring

The opportunity costs of holding current assets are called ______ costs.

carrying

The primary tool in short-term financial planning is the ______.

cash budget

The time between paying cash for inventory and receiving cash from selling a product is called the ______.

cash cycle

Ending accounts receivable equals starting accounts receivable plus ______ minus collections.

credit sales

Commercial paper is an example of a(n) ______.

debt security

Sources of cash can involve increasing a(n) ______ account.

equity, liability

A short-term financial policy involving a higher proportion of long-term debt than short-term debt is classified as a(n) _____ policy.

flexible

Which of the following are activities that increase cash?

increasing long-term debt decreasing fixed assets

The operating cycle is composed of which periods?

inventory period accounts receivable period

A lack of safety reserves can lead to which of the following?

lost customer goodwill lost sales

Firms who attempt to match the maturity of assets and liabilities are said to employ ______.

maturity hedging

The difference between cash collections and cash disbursements is the predicted ______.

net cash inflow

Which activities are primary to short-term finance?

operating activities financing activities

Which of the following represents a use of cash?

repurchasing stock accounts receivable increases paying off a loan

Which of the following are shortage costs?

safety reserve costs order costs

Which of the following activities by a firm will increase cash?

selling stock selling bonds obtaining a loan

Ideally, short-term assets are financed with ______.

short term liabilties

The cash budget allows the firm to identify Blank______.

short-term financial opportunities short-term financial needs

Those firm activities that increase cash are called ______.

sources of cash

Under a conventional factoring, _______

the collection of the receivables is the responsibility of the seller the receivables are sold at a discount