Financial Management Ch. 16 Short-term Financial Planning
Between the 1960s and the present time, current liabilities have risen from about 20% of total liabilities to almost Blank______%.
30
Inventory period equals Blank days divided by the inventory turnover.
365
Receivables period equals Blank days divided by the receivables turnover.
365
Which of the following increase the cash cycle?
A longer inventory period A longer receivables period
What does an average collection period of 57 mean?
Customers took, on average, 57 days to pay.
What does an inventory period of 111 days mean?
On average, inventory sat for about 111 days before it was sold.
Which of the following are shortage costs?
Order costs Safety reserve costs
Place the steps of the operating cycle in order from first to last.
Order inventory Sell the finished product Collect cash from the sale
Under which type of inventory loan does the lender have a lien against all of the borrower's inventory?
a blanket inventory lien
A flexible short-term financing strategy implies surplus cash and little borrowing, but the advantage of such a strategy is Blank______.
a reduced probability of financial distress
Current assets are cash and other assets that will be turned into cash within Blank______.
a year
Current liabilities are firm obligations that will require cash payment within Blank______.
a year
Payables manager
accounts payable
The Blank______ period is the time between the receipt of inventory and actually paying for that inventory.
accounts payable
The cash cycle is equal to the operating cycle minus the Blank______ period.
accounts payable
The time from the acquisition of inventory to when the inventory is paid for is called the Blank______ period.
accounts payable
Credit manager
accounts receivable
The operating cycle equals the sum of the inventory period and the Blank______ period.
accounts receivable
The time taken to collect on credit sales is called the Blank______ period.
accounts receivable
The shorter the cash cycle, the lower the firm's investment in Blank______.
accounts receivable inventories
The time it takes to collect on the sale of a product is called the Blank______.
accounts receivable period
The two types of accounts receivable financing are Blank______ and Blank______.
assignment factoring
Which of the following are typical inventory loans?
blanket inventory lien field warehouse financing trust receipt
Short-term finance is concerned with current assets and current liabilities, whereas long-term finance is concerned with Blank______.
capital structure dividend policy capital budgeting
The primary tool in short-term financial planning is the Blank______.
cash budget
The time between paying cash for inventory and receiving cash from selling a product is called the Blank______.
cash cycle
A flexible short-term financing strategy implies Blank______.
cash surpluses a relatively large pool of marketable securities
Ending accounts receivable equals starting accounts receivable plus Blank______ minus collections.
credit sales
Short-term finance is primarily concerned with Blank______.
current assets current liabilities
Commercial paper is an example of a(n) Blank______.
debt security
The basic balance sheet identity can be written as Net working capital + Fixed assets = Long-term debt + Blank______.
equity
Sources of cash can involve increasing a(n) Blank______ account.
equity liability
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 net payments receivable equals the cash collections minus the cash disbursements.
false
True or false: The operating cycle equals current assets minus current liabilities.
false
Which activities are primary to short-term finance?
financing activities operating activities
A short-term financial policy involving a higher proportion of long-term debt than short-term debt is classified as a(n) Blank______ policy.
flexible
With the Blank approach, a firm uses a pool of marketable securities as a buffer against changing current asset needs.
flexible
A restrictive short-term financial policy implies a Blank______ proportion of short-term debt relative to long-term debt.
high
Purchasing manager
inventory
The time it takes to acquire and sell inventory is called the Blank______ period.
inventory
For US 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 operating cycle is composed of which periods?
inventory period accounts receivable period
Dividend payments belong to the category of Blank______.
long-term financing expenses
Cash manager
marketable securities
Which of the following is not a characteristic of commercial paper?
maturities of one year or more
Firms who attempt to match the maturity of assets and liabilities are said to employ Blank______.
maturity hedging
The difference between cash collections and cash disbursements is the predicted Blank______.
net cash inflow
The balance sheet identity says:
net working capital plus fixed assets equals long-term debt plus equity
The primary concerns in short-term finance are the firm's short-run Blank and financing activities.
operating
Carrying costs involve Blank______.
opportunity costs
A restrictive short-term financing strategy implies Blank______.
possible cash shortages a small investment in net working capital
A product begins its accounting life as inventory and is converted to a(n) Blank______ when it is sold on credit.
receivable
Carrying costs Blank______ with the level of investment in current assets.
rise
Either stock-out or cash-out costs occur when a firm Blank______.
runs out of inventory to sell runs out of available cash
Being low on cash can force a firm to Blank______.
sell marketable securities default on debt borrow money
The financing of current assets is measured by the proportion of Blank______.
short-term debt and long-term debt used to finance current assets
The cash budget allows the firm to identify Blank______.
short-term financial opportunities short-term financial needs
Ideally, short-term assets are financed with Blank______.
short-term liabilities
Those firm activities that increase cash are called Blank______.
sources of cash
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
Under a conventional factoring, Blank______.
the receivables are sold at a discount the collection of the receivables is the factor's responsibility
The two major elements of a firm's short-term financial policy are Blank______.
the size of the firm's investment in current assets the financing of current assets
True or false: A stock-out occurs if a store runs out of inventory and could result in lost customers.
true
True or false: The cash cycle is equal to the operating cycle minus the accounts payable period.
true
Those firm activities that decrease cash are called Blank______.
uses of cash
Which of the following are examples of cash disbursements?
wages and taxes payments of accounts payable capital expenditures
