Question 1

Blanchard Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:

Accepted Answer

The answer of Blanchard Corporation is estimating its cash collections...

Question 2

How does the firm's sources and uses of cash relate to its need for short-term borrowing?

Accepted Answer

The answer of How does the firm's sources and uses...

Question 3

A firm is considering the following changes: increasing inventory variety which will increase average inventory by $10,000, and offering more liberal sales terms which will result in average receivables increasing to $65,000.These actions are expected to increase sales to $800,000 per year, and cost of goods will remain at 75%.Because of the increased purchases, average payables will increase to $35,000.What effect will these changes have on the cash conversion cycle?

Accepted Answer

The answer of A firm is considering the following changes:...

Question 4

How do firms develop a short-term financing plan that meets their need for cash?

Accepted Answer

The answer of How do firms develop a short-term financing...

Question 5

Discuss the usefulness of the concept of "maturities matching" in finance.

Accepted Answer

The answer of Discuss the usefulness of the concept of...

Question 6

How would you develop a model to analyze the benefits and costs of stretching payables? Assume that cash discounts will be forgone and that short-term bank funds are usually available.

Accepted Answer

The answer of How would you develop a model to...

Question 7

Create the statement of sources and uses of cash from the following entries:

Accepted Answer

The answer of Create the statement of sources and uses...

Question 8

List and explain the four forecast uses of cash.

Accepted Answer

The answer of List and explain the four forecast uses...

Question 9

Show the effect of the following transactions on cash, net working capital, and the current ratio.Assume that the current ratio exceeds 1.0 to begin.
The firm borrows $1,000 short-term and pays $500 in accounts payable.
The firm factors $1,000 in receivables at a 5% discount.
The firm issues $1,000 in long-term bonds, using the proceeds to pay $800 in payables and purchase $200 in marketable securities.

Accepted Answer

The answer of Show the effect of the following transactions...

Question 10

Zoma Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:

Accepted Answer

The answer of Zoma Corporation is estimating its cash collections...

Question 11

Create the statement of sources and uses of cash from the following entries:

Accepted Answer

The answer of Create the statement of sources and uses...

Question 12

Noorie Corporation is planning its production and ending inventory for the next quarter.The CFO has provided you with the following information:

Accepted Answer

The answer of Noorie Corporation is planning its production and...

Question 13

How does long-term financing policy affect short-term financing requirements?

Accepted Answer

The answer of How does long-term financing policy affect short-term...

Question 14

The text suggests that, of the three financing strategies shown, the relaxed strategy is probably the worst from the standpoint of managerial evaluation.Why is this thought to be the case, and when may it be an acceptable practice?

Accepted Answer

The answer of The text suggests that, of the three...

Question 15

Why do firms need to invest in net working capital?

Accepted Answer

The answer of Why do firms need to invest in...

Question 16

Firms are often known to pay commitment fees to banks for the privilege of receiving a line of credit.Does it make sense for a firm to pay for something that, at least at the present time, it does not know whether it will use?

Accepted Answer

The answer of Firms are often known to pay commitment...

Question 17

CumChan has issued commercial paper with a face value of $250,000 that will mature in 60 days.The present market value of the paper is $242,000.Interest on the paper is, therefore:

Accepted Answer

The answer of CumChan has issued commercial paper with a...

Question 18

Select the best loan terms from the banks below.The firm needs to obtain $500,000 in cash:
Bank A: 10% stated rate, 20% compensating balance that earns no interest.
Bank B: 12.5% stated rate, no compensating balance.
Bank C: 11% stated rate, 15% compensating balance that earns 2.5% interest.

Accepted Answer

The answer of Select the best loan terms from the...

Question 19

Calculate the simple interest on a bank loan of $200,000 for a month, with a quoted rate of 6% simple interest.At the end of the month how much would you need to repay?

Accepted Answer

The answer of Calculate the simple interest on a bank...

Question 20

Globex Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:

Accepted Answer

The answer of Globex Corporation is estimating its cash collections...

Quiz 20: Working Capital Management

How does the firm's sources and uses of cash relate to its need for short-term borrowing?

How do firms develop a short-term financing plan that meets their need for cash?

Discuss the usefulness of the concept of "maturities matching" in finance.

How would you develop a model to analyze the benefits and costs of stretching payables? Assume that cash discounts will be forgone and that short-term bank funds are usually available.

Create the statement of sources and uses of cash from the following entries:

List and explain the four forecast uses of cash.

Create the statement of sources and uses of cash from the following entries:

Noorie Corporation is planning its production and ending inventory for the next quarter.The CFO has provided you with the following information:

How does long-term financing policy affect short-term financing requirements?

The text suggests that, of the three financing strategies shown, the relaxed strategy is probably the worst from the standpoint of managerial evaluation.Why is this thought to be the case, and when may it be an acceptable practice?

Why do firms need to invest in net working capital?

Firms are often known to pay commitment fees to banks for the privilege of receiving a line of credit.Does it make sense for a firm to pay for something that, at least at the present time, it does not know whether it will use?

CumChan has issued commercial paper with a face value of $250,000 that will mature in 60 days.The present market value of the paper is $242,000.Interest on the paper is, therefore:

Select the best loan terms from the banks below.The firm needs to obtain $500,000 in cash: Bank A: 10% stated rate, 20% compensating balance that earns no interest. Bank B: 12.5% stated rate, no compensating balance. Bank C: 11% stated rate, 15% compensating balance that earns 2.5% interest.

Calculate the simple interest on a bank loan of $200,000 for a month, with a quoted rate of 6% simple interest.At the end of the month how much would you need to repay?