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