Financial MGMT 3.01

Question 1

current assets - current liabilities =

Answer 1

Working Capital

Question 2

current assets/current liabilities =

Answer 2

Current Ratio

Question 3

Cash+Market securities + AR=

Answer 3

Quick Assets

Question 4

Quick assets/ current liabilities

Answer 4

quick ratio or acid test

Question 5

average inventory/ cogs per day

Answer 5

ICP (inventory conversion peried

Question 6

Beginning inventory + ending inventory / 2

Answer 6

Average inventory

Question 7

Average accounts receivable / average credit sales per day

Answer 7

RCP (accounts receivable collection period)

Question 8

Average Payable / purchases per day (or cogs/365)

Answer 8

PDP (accounts payable deferral period)

Question 9

ICP + RCP - PDP =

Answer 9

Cash conversion cycle (CCC)

Question 10

the time buyers are given to make payments ( typically 30 days)

Answer 10

Credit period

Question 11

business obtains loan offering receivables as collateral

Answer 11

pledging

Question 12

Lending agreement whereby the borrower assigns an A/R for cash, but must pay interest and usually a service charge on the advance

Answer 12

Assignment of A/R

Question 13

business may sell receivable to a financing company, which accepts the risk of non-collection, and charges a percentage fee for accepting that risk as well as an interest rate based on the funds advanced prior to the date of collection of rec due

Answer 13

Factoring w/o recourse

Question 14

net credit sales/average a/r

Answer 14

AR turnover

Question 15

Beginning AR + ending AR / 2

Answer 15

average AR

Question 16

360/AR turnover

Answer 16

number of days of sales in average receivable

Question 17

average daily demand/average lead time

Answer 17

reorder point without safety stock