Reading...
Play button
Play button
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;
30 Cards in this Set
- Front
- Back
|
What are ways to obtain finance from sources of cash?
|
increase in long-term debt, increase in equity, increase in current liabilities
|
|
|
What are ways of selling assets from sources of cash?
|
decrease in current assets, decrease in fixed assets
|
|
|
What are uses of cash for paying creditors or stockholders?
|
decrease in long-term debt, decrease in equity, and decrease in current liabilities
|
|
|
What are uses of cash for buying assets?
|
increase in current assets and increase in fixed assets
|
|
|
What is the time it takes to receive inventory, sell it and collect on the receivables generated from the sale?
|
The Operating Cycle
|
|
|
What is the time inventory sits on the shelf?
|
Inventory period
|
|
|
What is the time it takes to collect on receivables?
|
Accounts Receivable Period
|
|
|
What is the time between payment for inventory and receipt from the sale of inventory?
|
The Cash Cycle
|
|
|
What measures how long we need to finance inventory and receivables?
|
Cash Cycle
|
|
|
What are characteristics of flexible (conservative )policy?
|
Large Amounts of cash and marketable securities, large amounts of inventory, liberal credit policies (large accounts receivable), relatively low levels of short-term liabilities, high liquidity
|
|
|
What are characteristics of restrictive (Aggressive) policy?
|
Low cash and marketable security balances, low inventory levels, little or no credit sales (low accounts receivable), relatively high levels of short-term liabilities, low Liquidity
|
|
|
What is to borrow short-term to meet peak needs, maintain a cash reserve for emergencies?
|
Compromise policy
|
|
|
What are souces of short term financing?
|
Bank Loans, Commercial Paper, and Loans Based on Short-Term Assets
|
|
|
What is use to determine the cost of the credit to be able to compare differing terms--standardizes the term to one year?
|
Annual Percentage Rate (APR) aka Nominal Rate
|
|
|
What takes into account the compounding that occurs on loans of less than one year. The real cost of the loan if it were renewed each time it matured?
|
Effective Annual Rate (EAR) or (APY)
|
|
|
What is ability to pay expected bills in a timely manner?
|
Transactions Motive
|
|
|
What is required by many banks?
|
Compensating Balances
|
|
|
What is ability to pay unexpected expenses. Keep cash balances on hand to be able to pay without having to sell off other assets on a moments notice?
|
Precautionary Motive
|
|
|
What is to keep cash on hand to be able to take advantage of potential profit-making opportunities in the future?
|
Speculative Motive
|
|
|
What 4 things do the size of the cash balance depend on?
|
How quickly and cheaply a firm can raise cash when needed, How accurately managers can predict cash requirements, How much precautionary cash the managers need for emergencies, and Investment Opportunities
|
|
|
What is holding of cash (2)?
|
Non-interest Bearing and Marketable Securities
|
|
|
What are considerations in using Marketable?
|
Financial Risk (Default Risk), Interest Rate Risk, Liquidity, Taxability, and Yields
|
|
|
What are some Marketable Securities?
|
U.S. Treasury Bills, Federal Agency Securities, Negotiable Certificates of Deposit, Commercial Paper, and Money Market Mutual Funds
|
|
|
What are ways to speed up the Collection policy?
|
Trade Discounts and Late Charges
|
|
|
What is advantage of slower collections?
|
Encourages Sales
|
|
|
What are carrying costs?
|
cost of capital, storage and Handling, insurance, property taxes and Depreciation and Obsolescence
|
|
|
What are ordering, shipping and receiving costs of inventory?
|
Cost of placing orders or production set-up and shipping and handling costs
|
|
|
What are costs of running short costs of inventory?
|
Loss of Sales, Loss of customer goodwill, and disruption of production schedules
|
|
|
What does Total Inventory Costs =? (equation)
|
Total Carrying Costs + Total Restocking Costs
|
|
|
What is the ordering quantity that minimizes the total costs of inventory?
|
Optimal Inventory
|
