Short-Term Financial Planning

Short-term finance is primarily concerned with ______.

* current liabilities * current assets

which activities are primary to short-term finance

* financing activities * operating activities

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

* inventories * accounts receivable

What firm activities decrease cash?

* paying off long-term debt * repurchasing some stock * buying some inventory for cash * buying some property

What activities by a firm will increase cash?

* selling stock * selling bonds * borrowing over the long term * selling some inventory for cash * selling some property

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

cash cycle

Which activities are primary to short-term finance?

* Financing activities * Operating activities

What will increase the cash cycle?

* a longer receivables period * a longer inventory period

Which of the following represents a use of cash?

* accounts receivable increases * repurchasing stock * paying off a loan

The gap between short-term cash inflows and outflows can be filled by ________.

* borrowing * maintaining a liquidity reserve

Match the right with the left: 1. Buy raw materials 2. Pay cash for purchases 3. Make a product 4. Sell a product

1. How much inventory 2. Whether to borrow or draw down cash balances 3. what choice of production technology to use 4. whether credit should be extended to a particular customer

The steps of operating cycle in order from first to last.

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

Match left to right: 1. Cash manager 2. Credit manager 3. Purchasing manager 4. Payables manager

1. marketable securities 2. accounts receivable 3. Inventory 4. Accounts payable

If the operating cycle is 200 days and the accounts receivable period is 80 days, then the inventory period is _______ days.

120 days

If the cost of goods sold is $10 million and the average payables is $5 million, then the payables turnover is ___ times.

2. payables turnover = cogs / average.payables

If credit sales are $12 million and the average accounts receivable is $2 million, then the receivables turnover ratio is ____ times.

6

If the inventory is acquired on day zero and paid for on day 40, and then the product is sold and cash is collected for the sale on day 100, the cash cycle equals _____ days.

60 days

When cost of goods sold is $9 million and average inventory is $3 million, then the inventory turnover is ____.

Inventory turnover = cogs / ave.inventory. 3

Those firm activities that increase cash are called ______.

Sources of cash

The _______ 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 ___________ period.

accounts payable

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

accounts receivable

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

accounts receivable period

The difference between the operating cycle and the accounts payable period is the _____________.

cash cycle

Short-term cash flows are uncertain because ______.

future sales and costs cannot be precisely predicted

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

inventory

Net working capital equals current assets _______ current liabilities

minus

The balance sheet identity says:

net working capital + fixed assets = long-term debt + equity

Current assets are cash and other assets that will be turned into cash within _______ .

one year

Current liabilities are firm obligations that will require cash payment within __________.

one year

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

receivable