Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
33 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
Liquidity ratio measures |
Amount of cash readily available |
|
|
|
Current ratio |
Current assets/current liabilities |
|
|
|
Quick ratio |
Current assets-inventory / current liabilities |
|
|
|
Efficiency ratios measure |
How efficiently components of working capital is measured |
|
|
|
Inventory turnover |
Inventory / cos * 365 |
Average number of days to sell a piece of inventory |
|
|
Receivables turnover |
Receivables / sales * 365 |
Average number of days it takes to get paid |
|
|
Payables turnover |
Payables / purchases *365 |
|
|
|
Working capital cycle measure |
How long capital stays tied up in current assets |
|
|
|
Non manufacturing working capital cycle formula |
Inventory turnover+receivables turnover-payables turnover |
|
|
|
Lowering working capital cycle |
Reduce raw material inventory Delay payments to suppliers Reduce WIP Reduce finished goods inventory Reduce credit given to customers |
|
|
|
Symptoms of overtrading |
Increased -revenue -inventory & receivables -assets -assets funded by credit Decreased -current ratio Quick ratio |
|
|
|
Credit cycle refers to |
All events taking place between - Receipt of customer order To -receipt of cash for sale |
|
|
|
How will reducing credit cycle impact cash flow and liquidity |
Improve it |
|
|
|
Credit control risks to be controlled |
-default -slow payment |
|
|
|
Effective debt collection: 4 points |
-dedicated trained staff -well defined procedures -monitoring overdue accounts -flexibility |
|
|
|
Age analysis of receivables |
List of all customers who currently owe money |
|
|
|
Factoring recourse meaning |
-with recourse= supplier takes risk of bad debt -without recourse = factor takes the risk |
|
|
|
Factoring services |
-provide finance -operating sales ledger -non recourse finance -confidential invoice discounting |
|
|
|
Cash budget 4 steps |
1. Forecast cash receipts 2. Forecast cash payments 3. Compare 1 to 2 4. Calculate cumulative cash flow |
|
|
|
Float definition |
The delay between initiating a transaction and it actually changing the bank balance |
|
|
|
Baumol model identifies the optimum amount of |
Treasury bills to sell, by value, each time cash balance needs replenished |
|
|
|
Baumol model criticism |
Assumes net cash flow is steady and predictable |
|
|
|
The Miller-Orr model |
Used for setting the target cash balance, by setting lower and upper limit. The part between lower and upper limit is referred to as spread. |
|
|
|
Methods of export finance |
1. Export factoring 2. Bills of exchange 3. Documentary credits 4. Forfaiting |
|
|
|
Adam Smith's 4 principles |
1. Equity 2. Certainty 3. Efficiency 4. Convenient |
|
|
|
Modern five principles of taxation |
1. Efficiency 2. Equity (fairly levied) 3. Consideration of economic effects 4. Minimum tax gap 5. Appropriate gov revenues |
|
|
|
Tax base definition |
Something that is liable for tax. Ex 1. Income 2. Capital or wealth 3. Consumption |
|
|
|
Sources of tax rules |
1. Domestic primary legislation 2. Current practice -> precedence 3. Supranational bodies (EU) 4. International tax treaties |
|
|
|
Incidence |
On the person who actually pays tax. Formal= person in contact with authorities Effective=person who ends up bearing the cost |
|
|
|
Competent jurisdiction |
Who has legal power to assess + collect taxes |
|
|
|
Hypothecation |
Funds from certain taxes area earmarked for specific types of expenditure Vehicle tax = road maintenance |
|
|
|
Corporate tax base usually include |
Income arising from all sources -earning from trade -gains from disposal -other nonbusiness income |
|
|
|
Scheduler system of corporate taxation allows government more control by |
H |
|
