Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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Which of the following is false?
a. Baumol model helps firm to find out their desirable level of cash balance under certainty
b. Any presence of a cash buffer affects the cost of holding cash and ultimately the annual cost of cash for a particular firm
c. A higher average daily disbursement float than average daily collection float is more desirable for a firm
d. Accounts payable increase the number of days a firm’s resources are tied up in the operating cycle
Explain why cash management is critical for young, fast growing companies and describe how a company could seek to cover any cash shortfalls in the future.
Determine ways to improve the cash flows of an organization by addressing the following questions:
What methods can be used to speed up a firm’s cash inflows?
What methods can be used to delay a firm’s cash outflows?
What are some of the cash management strategies used by your organization or by organizations that you know?
Are there any ethical items to consider with any of these methods or strategies?
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Which among the following is not recommended for solving cash problems of a business? a.Arrange for overdraft facilities in case a shortage is forecasted b.Allowing extra time to customers to pay off bills so as to boost the sales. c.Finding a cheaper source of supply of raw materials d.Disposing off assets that are not being put to effective usearrow_forwardWhat would happen to a company if it ran out of cash?Explain the importance of good working capital management and the cash conversion cyclearrow_forwardWhich of the following statements is NOT CORRECT? a. The cash budget is useful for estimating potential funding needs, especially for short-term working capital loans. b. Working capital management is critical because it affects financing decisions and the firm's profitability. c. Credit policy affects working capital because it impacts both sales and the time it takes for receivables to be obtained. d. If a company needs to increase its cash flow from operations in the next month or two, it can change its credit policy from 2/10 net 30 to net 60. e. f a company is unsure about the volume of sales, profits, and cash flows for the coming year, it will retain a relatively large amount of cash and marketable securities.arrow_forward
- For projects with cash outflows up front and cash inflows later on, ignoring the time value of money would lead companies to understate the value of investment projects and therefore decline to make investments that they should in fact pursue. True Falsearrow_forwardDescribe what would happen to a company if it ran out of cash. Explain the importance of good working capital management and the cash conversion cyclearrow_forwardWhat are the lessons for the lessons for investors and corporate managers with respect to market efficiency (check all that apply)? Group of answer choices If stocks are fairly priced, then investors can expect future cash flows that fairly compensate them for the risk of that investment You get paid (in the form of expected returns) for taking on risk If markets are efficient then relevant information quickly gets incorporated into prices Treasury departments of industrial firms should try to outguess the markets in managing their corporate casharrow_forward
- The company’s usage of the Baumol model in cash management involves trade-off. A decrease in the optimal transaction size would more likely result from a. Increase of return on marketable securities b. None of the choices is correct c. Increase in the annual demand for cash d. Decrease of debt to asset ratioarrow_forwardIs a negative free cash flow (FCF) always a bad sign? A negative free cash flow means that the company does not have sufficient internal funds to finance investments in fixed assets and working capital. Is there a scenario where a negative free cash flow is not a bad sign for the company?arrow_forwardA company is expecting a temporary negative cash flow. Discuss the benefits of funding the deficit by arranging an overdraft facility with its bankarrow_forward
- Briefly explain three reasons why cashflow management is challenging for shipping companies especially during a recession.arrow_forwardYour CFO tells you as finance manager that he feels much safer to have a larger inventory and cash level than before. What are trade-offs involved in the decision of how much inventory or cash the firm should carry. Answer for cash level separatelyarrow_forward
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