FIN Ch 16

Which of the following increase the cash cycle?

- A longer inventory period - A longer receivables period

Which of the following are examples of cash disbursements?

- Capital expenditures - Payments of accounts payable - Wages and taxes

A flexible short-term financing strategy implies _________.

- a relatively large pool of marketable securities - cash surpluses

The two types of account receivable financing are _________ and _________.

- assignment - factoring

Short-term finance is concerned with current assets and current liabilities, whereas long-term finance is concerned with ________.

- capital structure - dividend policy - capital budgeting

Short-term finance is primarily concerned with ________.

- current liabilities - current assets

The shorter the cash cycle, the lower the firm's investment in _________.

- inventories - accounts receivable

For U.S. corporations, current assets have fallen from 50% of total assets in the 1960s to 40% of total assets today primarily because of more efficient _________.

- inventory management - cash management

The main problems with maturity mismatching (financing long-term assets with short-term debt) are that it _________.

- is risky - requires too much cash

Which of the following is not a characteristic of commercial paper?

- maturities of one year or more

A short-term financial plan will include which of the following?

- minimum cash balance - interest on short-term borrowing - cumulative surplus (deficit)

The financing of current assets is measured by the proportion of __________.

- short-term debt and long-term debt used to finance current assets

The cash budget allows the firm to identify ___________.

- short-term financial needs - short-term financial opportunities

Under a conventional factoring, ________.

- the collection of the receivables is the factor's responsibility - the receivables are sold at a discount

Which short-term financial managers are involved with selling on credit and are directly responsible to the vice president of finance?

- the controller - the credit manager

The two major elements of a firms's short-term financial policy are ________.

- the financing of current assets - the size of the firm's investment in current assets

The two major elements of a firm's short-term financial policy are ________.

- the size of the firm's investment in current assets - the financing of current assets

Which activities are primary to short-term finance?

-financing activities - operating activities

Place the steps of the operating cycle in order from first to last. Collect cash from the sale Order inventory Sell the finished product

1. Order inventory 2. Sell the finished product 3. Collect cash from the sale.

Between the 1960s and the present time, current liabilities have risen from about 20% liabilities to almost _______%.

30

True or false: The next payments receivable equals the cash collections minus the cash disbursements

False

The time it takes to collect on the sale of a product is called the ________.

accounts receivable period

The balance sheet identity says:

net working capital plus fixed assets equals long-term debt plus equity

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

- noncash current asset - fixed asset

A short-term financial plan will include ________.

- short-term borrowing repaid - new short-term borrowing - a minimum cash balance

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

Cash budget

Ending accounts receivables equals starting accounts receivable plus ___________ minus collections.

Credit sales

True or false: Cash collections equal beginning cash times sales.

False

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

False

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

False The cash cycle is the difference between disbursement and collection of cash

What does maturity hedging involve?

Financing fixed assets with long-term financing and inventories with short-term financing

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

Flexible

The primary concerns in short-term finance are the firm's short-run _________ and financing activities

Operating

The financing of current assets is measured by the proportion of _________.

Short-term debt to equity used to finance current assets

Those firm activities that increase cash are called _______.

Sources of cash

True or false: The cash cycle is equal to the operating cycle minus the accounts payable period.

True

The cash cycle is equal to the operating cycle minus the ________ period.

accounts payable

The operating cycle equals the sum of the inventory period and the ________ period.

accounts receivable

The time taken to collect on credit sales is called the _______ period.

accounts receivable

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

cash cycle

Match the titles with the duties of short-term financial managers.

cash manager -> marketable securities credit manager -> accounts receivable purchasing manager -> inventory payables manager -> accounts payable

Ending accounts receivable equals starting accounts receivable plus _________ minus collections

credit sales

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

debt security

The basic balance sheet identity can be written as Net working capital + Fixed assets = Long-term debt + ________.

equity

The time it takes to acquire and sell inventory is called the _______ period.

inventory

Dividend payments belong to the category of _________.

long-term financing expenses

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

net cash inflow

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

net cash inflow

The ________ cycle is the time from when inventory is acquired until cash is collected from the sale of the product.

operating

Carrying costs involve ________.

opportunity costs

A product begins its accounting life as inventory and is converted to a(n) _________ when it is sold on credit.

receivable

Carrying costs _________ with the level of investment in current assets.

rise

Unsecured bank loans are _________.

short term

A(n) ________ bank loan requires no security or collateral

unsecured