Ch. 22 Managing the Firm's Assets Flashcards
Accounting return on investment technique
A capital budgeting technique that compares expected average annual after-tax profits to the average book value of an investment.
Capital budgeting analysis
An analytical method that helps managers make decisions about long-term investments.
Cash conversion period
The time required to convert paid-for inventory and accounts receivable into cash.
Days in inventory
The number of days, on average, that a company holds inventory.
Days in payables
The number of days, on average, that a business takes to pay its accounts payable.
Days sales outstanding (average collection period)
The number of days, on average, that a firm extends credit to its customers.
Discounted cash flow (DCF) techniques
Capital budgeting techniques that compare the present value of future cash flows with the cost of the initial investment.
Internal rate of return (IRR)
The rate of return a firm expects to earn on a project.
Lock box
A post office box for receiving remittances from customers.
Net present value (NPV)
The present value of expected future cash flows less the initial investment outlay.
Payback period technique
A capital budgeting technique that measures the amount of time it will take to recover the initial cash outlay of an investment.
Pledged accounts receivable
Accounts receivable used as collateral for a loan.
Working capital cycle
The daily flow of resources through a firm’s working capital accounts.
Working capital management
The management of current assets and current liabilities.
