Chapter 3 - Current Asset Management

Question 1

what are the 4 steps for managing cash?

Answer 1

1. forecasting cash flows
2. accelerating cash flows
3. investing excess cash
4. borrowing cash for working capital purposes

Question 2

what are the two approaches to presenting cash budgets?

Answer 2

1. cash receipts and disbursements approach

2. adjusted net income approach

Question 3

what is cash receipts and disbursement approach?

Answer 3

based on cash transaction. and useful when forecasting cash receipts for periods of up to 6 month. Care should be exercised when using this approach for periods exceeding six month since projected figures beyond this point become increasingly unreliable

Question 4

what is net income approach?

Answer 4

generally used for budgeting cash for periods longer than 6 month.

Question 5

what are the two section for cash receipts and disbursements approach?

Answer 5

cash receipts and cash disbursements

Question 6

what are the two section for adjusted net income approach?

Answer 6

sources of cash and uses of cash

Question 7

what is inventory turnover ratio?

Answer 7

Cost of sales / average inventory