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42 Cards in this Set

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Also referred to as current assets and consists of cash, marketable securities, accounts receivalbe, and inventory.
Gross Working Capital
The difference between a business's total current assets and its total current liabilities.
Net Working Capital
Is normally used to pay for small daily items such as postage or minor supplies.
Petty Cash
Cash consists of these four things...
Petty cash, cash on hand, cash in checking, and cash in savings
The goal of cash management is...
To obtain the highest return possible on cash.
Consists of daily sales and a change fund.
Cash on Hand
May draw interest, but normally are charged for each check that is written against them.
Cash in bank, checking (checking accounts)
Your business will want to maintain one of these for several reasons: 1) The earn higher interest rates than checking accounts, 2) the small business must set aside employee taxes, sales taxes, and other payments due to governmental agencies, and 3) some funds should be reserved for emergency repairs and services.
Cash in bank, savings (savings account
The time period between the writing of a check and its subsequent deposit in a bank account.
Float
The time that elapses between payment by check and the check's actually clearing at the bank, removing funds from our checking account.
Disbursement Float
The amount of time that elapses between when you deposit a debtor's check in your account and the check clears, placing funds in our account.
Collections Float
A post office box that is opened by an agent of the bank, and checks received there are immediately deposited in our account.
Lockbox
Accomplished when funds are immediately transferred from one bank account to another via computer.
Electronic Funds Transfer (EFT)
Those investment vehicles that include money market mutual funds, U.S. Treasury bills, certificates of deposit, government and corporate bonds, and stocks.
Marketable Securities
The process of selling our accounts receivable to another firm at a discount off of the original sales price; allows us to have credit sales and still obtain immediate cash for all sales.
Factoring
The three Cs of credit...
Character, capacity, and collateral
Deemed favorable if that customer has paid bills on time in the past and has good credit references from other creditors.
Character
Refers to whether the customer has enough cash flow or disposable income to pay back a loan or pay off a bill.
Capacity
The ability to satisfy a debt or pay a creditor by selling assets for cash.
Collateral
The requirements that our business establishes for payment of a loan.
Credit Terms
Accomplished by determining the amounts of accounts receivable, the various lengths of time for which these accounts have been due, and the percentage of accounts that falls within each time frame.
Aging of accounts receivable
The most widely used formula for determining the reorder quantity .
Economic Order Quantity (EOQ)
root of (2DS) / IP
EOQ Formula
The point at which items are restocked; has three factors: lead time, daily demand, and safety stock.
Reorder point (ROP)
The time that lapses from order placement to order receipt.
Lead Time
The quantity of a product that is used per day.
Daily demand
The quantity of stock held for variations in demand.
Saftey Stock
The model used if daily demand can be accurately predicted, vendor delivery reliability is outstanding, and vendors will deliver on an hourly or daily basis.
Just in Time (JIT)
The four basic categories of inventory...
Raw materials, work-in-process, finished goods, and maintenance, repair, and operating (MRO)
Items that a company uses in producing its final product.
Raw Materials
Consist of those items that are in the midst of being transformed into finished products.
Work-in-process
Those itmes that are actually sold by the business.
Finished goods
Itmes that are used by the firm in normal operations, but not sold by the firm.
Maintanence, repair, and operating (MRO)
Type of inventory analysis in which products are given importance based on their sales, relative to their percentage of inventory.
ABC Analysis
Business obligations that will be paid within the current accounting period.
Short-term debt
Obligations of a firm that are accumulated during the normal course of business and are primarily payroll taxes and benfits, property taxes, and sales taxes.
Accrued Liabilities
Consist of income, Social Security, Medicare, and unemployment taxes.
Federal employment taxes
Income, unemployment, and workmen's compensation taxes.
State employment taxes
Amounts deducted from list prices of items when specific services are performed by the trade customer.
Trade Discounts
Offered to credit customers to entice them to pay promptly.
Cash discounts
Offered by vendors to increase their own cash flow when the offer discounts to customers who purchase items in large quantities.
Quantity discounts
Offered on total purchases of an item during the vedor's fiscal year.
Cumulative discounts