FIN 420 FINAL EXAM STUDY GUIDE
working capital metrics - Answers :measures your organizations financial health by
analyzing readily available assets that could be used to meet any short-term financial
liabilities
current ratio - Answers :liquidity ratio that measures a company's ability to pay short
term obligations
quick ratio - Answers :indicator of company's short term liquidity position
- measures company's ability to meet short term obligations
net working capital - Answers :tells you how much money you have after you pay off
your liabilities
cash conversion cycle - Answers :time it takes to convert cash outflows from production
into cash inflows through the collection of accounts receivable
inventory conversion period - Answers :length of time required to convert materials into
finished goods and then to sell those goods
days sales outstanding - Answers :# of days that sales are held in accounts receivables
days payable outstanding - Answers :average time that a company takes to pay its bills
and invoices to trade creditors
cash turnover - Answers :how fast a company conducts its operation
trade credit - Answers :- offered to increase sales
- offered to customers and suppliers (extended time to pay their invoices)
discounts - Answers :companies will offer discounts to speed up cash coming in
advantages of offering trade credit - Answers :- can speed up collections
- don't have to go through a bank for financing if need funds
disadvantages of offering trade credit - Answers :it can be very expensive
in house management - Answers :advantage: company retain control over investment,
process and controls
disadvantage: expensive to train and retain employees with appropriate expertise
outsourced management - Answers :investments are assigned to a third party to
manage
advantages: funds manager has expertise
disadvantages:
working capital metrics - Answers :measures your organizations financial health by
analyzing readily available assets that could be used to meet any short-term financial
liabilities
current ratio - Answers :liquidity ratio that measures a company's ability to pay short
term obligations
quick ratio - Answers :indicator of company's short term liquidity position
- measures company's ability to meet short term obligations
net working capital - Answers :tells you how much money you have after you pay off
your liabilities
cash conversion cycle - Answers :time it takes to convert cash outflows from production
into cash inflows through the collection of accounts receivable
inventory conversion period - Answers :length of time required to convert materials into
finished goods and then to sell those goods
days sales outstanding - Answers :# of days that sales are held in accounts receivables
days payable outstanding - Answers :average time that a company takes to pay its bills
and invoices to trade creditors
cash turnover - Answers :how fast a company conducts its operation
trade credit - Answers :- offered to increase sales
- offered to customers and suppliers (extended time to pay their invoices)
discounts - Answers :companies will offer discounts to speed up cash coming in
advantages of offering trade credit - Answers :- can speed up collections
- don't have to go through a bank for financing if need funds
disadvantages of offering trade credit - Answers :it can be very expensive
in house management - Answers :advantage: company retain control over investment,
process and controls
disadvantage: expensive to train and retain employees with appropriate expertise
outsourced management - Answers :investments are assigned to a third party to
manage
advantages: funds manager has expertise
disadvantages:
