Working Capital Management

Question 1

Quick Ratio

Answer 1

Cash +m.s. + receivables / current liab.

Question 2

Annual cost = APR

Answer 2

360/(pay period - discount period) X discount/100 - %

Question 3

cash conversion cycle

Answer 3

inventory conversion period + rec. collection period - payables deferral period

Question 4

ccc = net o/c

Answer 4

of days to sell + # of days to collect - payable

Question 5

inventory turnover

Answer 5

COGS/avg. inventory

Question 6

inventory conversion period

Answer 6

365 / inventory turnover

Question 7

A/R turnover

Answer 7

sales/ avg. A/R

Question 8

receivables collection period

Answer 8

DSO = 365/ AR Turnover

Question 9

AP Turnover

Answer 9

COGS/avg AP

Question 10

AP Deferral period

Answer 10

365/AP turnover

Question 11

EOQ

Answer 11

Economic Order Quantity ESOC

squared root of 2SO/C

e. order size
s. annual sales
o. order cost
c. carrying costs/unit

Question 12

float

Answer 12

balance of checks outstanding - deposits made but not cleared

Question 13

days sales

Answer 13

ending AR / average daily sales

Question 14

market rate of interest (T-bill)

Answer 14

risk free rate of return + inflation premium

Question 15

net working capital

Answer 15

current assets - current liabilities

Question 16

cost of factoring

Answer 16

net cost/average amt invested