Fil Final

Front 1

_________ __________ ____________ is defined as current
assets minus current liabilities.

Back 1

Net working capital

Front 2

The ______________ cycle can be broken down into the inventory
conversion period and receivables collection period.

Back 2

operating

Front 3

_____________ balances are minimum cash balances in a non-
interest bearing bank account as a condition of a loan.

Back 3

compensating

Front 4

_______________ ______________ can readily be converted into
cash and are substitutes for holding cash balances.

Back 4

marketable securities

Front 5

__________________ balances/motives are necessary because no
firm knows its future transactions with certainty.

Back 5

precautionary

Front 6

Replacement decisions focus on _____________ cash flows
related to the new equipment less cash flows related to the old.

Back 6

incremental

Front 7

_______________ _________________ is the fastest method for
firms to transfer money between accounts at two different banks.

Back 7

wire transfer

Front 8

___________________ balances/motives are necessary for a firm to
pay its bills as they become due.

Back 8

transaction

Front 9

________________ float is the length of time between a firm’s
receipt of a payment and the deposit of the check for collection.

Back 9

processing

Front 10

A ___________________ system is when a firm pays a bank to take
on the responsibilities of cash collection

Back 10

lockbox

Front 11

____________ ________ ________ consider the changes in cash
inflows, cash outflows, and depreciation.

Back 11

operating cash flows

Front 12

The _______________ _____________ period is the average
length of time required to convert materials into finished goods, and
then to sell these goods.

Back 12

inventory conversion

Front 13

In deciding among __________ _________ projects, you must
ensure that the lifetimes are equal.

Back 13

mutually exclusive

Front 14

The capital budgeting decision is separate from the ________
decision.

Back 14

financing

Front 15

The ___________________ _________________ period is the
average length of time required to convert the firm’s receivables
into cash, that is, to collect cash following a sale.

Back 15

receivables collection

Front 16

________________ paper is unsecured, short-term promissory notes
sold by large, financially sound companies. It is generally sold to
other business firms, to insurance companies, to banks, and to money
market mutual funds.

Back 16

commercial

Front 17

When the firm sets a limit on the size of the capital budget, it is faced
with _________ _____________.

Back 17

capital rationing

Front 18

A _____________ concentration system is designed to move funds
from many small accounts into larger master accounts as efficiently
as possible.

Back 18

cash

Front 19

The _________________ _______________ period is the average
length of time between the purchase of raw materials and labor
and the payment of cash for them.

Back 19

payables deferall

Front 20

Working capital policy involves two basic decisions: 1) What is the
appropriate ____________ for current assets and 2) how should
current assets be ___________________?

Back 20

level, financed

Front 21

In capital budgeting analysis, ____________ ____________
___________, not accounting profits, are used.

Back 21

annual cash flows

Front 22

_____________ is the effect of a project on other parts of the firm,
and their effects must be considered in the incremental cash flows.

Back 22

erosion

Front 23

Current assets can be broken down into ___________________
current assets (minimum level of cash that must be maintained)
and ______________________ current assets (additional funds
required to meet seasonal/cyclical variations in sales).

Back 23

permanent, temporary

Front 24

In the maturity matching approach to working capital financing,
permanent assets should be financed with ______ -________
capital, while _____________________ assets should be
financed with short-term credit.

Back 24

long-term, temporary

Front 25

An ______________ project is one that calls for the firm to invest in
new facilities to increases sales.

Back 25

expansion

Front 26

Two disadvantages to using short-term financing are: 1) short-
term _______________ rates fluctuate more than long-term, and 2)
short-term debt comes __________ over shorter periods of time.

Back 26

interest, due

Front 27

________________ are continually recurring short-term liabilities,
especially accrued wages and accrued taxes. _________________
increase and decrease spontaneously as a firm’s operations expand
and contract. This type of debt is “free” in the sense that no interest
is paid on funds raised through __________________________.

Back 27

accruals, accruals, accruals

Front 28

A ______ _______ is a cash outlay which has already occurred
or the firm is committed too.

Back 28

sunk cost

Front 29

_________________ balances tend to raise the effective interest
rate on a bank loan.

Back 29

compensating

Front 30

______________ payable is the largest category of short-term debt.

Back 30

accounts

Front 31

In replacement analysis, the depreciation tax savings or loss is based
on the _________ in depreciation expense between the old and new
asset.

Back 31

difference

Front 32

A _______________ budget projects cash inflows and outflows over
some specified period of time.

Back 32

cash

Front 33

______________ float is the time between when a payer places a
payment in the mail and the time when it is received by the payee.

Back 33

mail

Front 34

Riskier projects should be evaluated with higher ________
______ than average-risk projects.

Back 34

required return (discount rate)

Front 35

An increase in net working capital would show up as a cash
_______ at time zero (t=0) and then again as a cash _________
at the ______ of the project’s life.

Back 35

outflow, inflow, end

Front 36

The ______________ _______________ cycle represents the
amount of time the firm’s cash is tied up between payment for
production inputs and receipt of payment from the sale of the
resulting finished product. The goal of the firm is to _________
this cycle.

Back 36

cash conversion, shorten

Front 37

A line of _______________ is a formal (committed) or informal
(non-committed) prearranged, short-term bank loan.

Back 37

credit

Front 38

The cost of holding excess cash is called an _________________
cost.

Back 38

opportunity

Front 39

In replacement analysis, two cash flows that occur at t=0 that are
not present in expansion projects are the price received from the
sale of the old equipment and the _____ effects of the sale.

Back 39

tax

Front 40

A ____ __ _____ is generally an unsecured loan.

Back 40

line of credit

Front 41

The ________ _____ is the lowest rate of interest charged by the
nation’s leading banks on business loans to their most reliable
business borrowers.

Back 41

prime rate

Front 42

______-_____ loans generally have maturities ranging from 90 days
to one year.

Back 42

short-term

Front 43

A ________ _____ _______ is a line of credit guaranteed by a bank
for a stated period regardless of the scarcity of money.

Back 43

revolving credit agreement

Front 44

A _______ ______ pledges items such as inventory as collateral for
a loan.

Back 44

blanket line

Front 45

Paying bills as late as possible without damaging the firm’s credit
rating is called __________ ________ __________.

Back 45

stretching account payable

Front 46

In _________ the firm offers its receivables as collateral for a short-
term loan.

Back 46

pledging

Front 47

_______ _______ _______ is the outright sale of accounts receivable
at a discount to a ______ or other financial institution to obtain funds.

Back 47

factoring accounts receivable, factor

Front 48

An unsecured short-term loan in which the way the borrowed money
is used provides the mechanism through which the loan is repaid is
called a ________-___________ ___________.

Back 48

self-liquidating loan

Front 49

A _______ is a financial institution that specializes in purchasing
accounts receivable from businesses.

Back 49

factor