If a firm wants to increase its working capital efficiency, it should: Increase its days inventory and days receivable and decrease days payable Decrease days inventory and increase days receivable and days payable Decrease days inventory, days receivable and days payable Decrease days inventory and days receivable and increase days payable Decrease cost of goods sold and interest expense

Introduction: Working Capital is day to day expense requirement of the organization. It is the…

Answered: m wants to increase its working capital…

Business

Finance

m wants to increase its working capital efficiency, it should: Increase its da

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 12QTD

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Seasonal working capital needs are best financed by: a. Short-term loans. b. Long-term debt. c. Forging dividend payments d. Selling inventory.
Assuming that the net sales and profit remain the same, a company’s return on investment would decrease if the invested capital decreases increase if invested capital increases increase if the invested capital turnover rate increases increase if the invested capital turnover rate decreases
A firm with a below industry net profit margin can improve its return on total assets by: a. increasing its current ratio c. decreasing its fixed asset turnover b. decreasing its total asset turnover d. increasing its total asset turnover
Suppose a company increases the price of its product and demand hardly declines.which of the following will increase? A) profit margin B) return - on - equity C) taxes D) all the above
A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called: A. Interest B. A debenture C. Financial leverage D. Covenants
Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions? How much will operating profit (πB) change if sales change? Are we using our debt wisely? Will we break even? How much revenue can we lose before we drop below the breakeven point? How much operating profit (πB) will we earn?
Explain the graph in the context of working capital management. Risks vs. Costs Trade-Off (Conservative Approach) Firm can reduce risks associated with short-term borrowing by using a larger proportion of long-term financing. Short-term financing Currènt assets Long-term financing Fixed assets TIME DOLLAR AMOUNT
9. Which of the following strategy enables a manager to report a higher current ratio? Select one: a. Pay off accounts payable prior to year-end b. Purchase more fixed assets c. Purchase more fixed income securities d. Invest more in long term debt
Could a company’s change in NWC be negative in a given year? (Hint: Yes.) Explain how this might come about. What about net capital spending?
Which of the following is the MOST correct? In reference to the time value of money, the present value is always labeled as t=1 Negative MVAs indicate that a company's executives are managing its expenses well nominal rates, or annual percentage rates, are always equal to the effective annual rate A strong ROE always indicates a strong year for the firm A firm should generally seek to minimize their days' sales outstanding values in order to access their receivables at a faster rate
What affects the firm’s operating break-even point? Several factors affect a firm’s operating break-even point. Based on the scenarios described in the following table, indicate whether these factors would increase, decrease, or leave unchanged a firm’s break-even quantity—assuming that only the listed factor changes and all other relevant factors remain constant. Increase Decrease No Change The product’s sales price increases. The amount of debt increases, causing the firm’s total interest expense to increase. The firm’s fixed costs increase. When fixed costs are high, a small decline in sales can lead to a decline in return on invested capital (ROI).
What is the effect of an increase in the cost of capital on the payback period, profitability index and accounting rate of return? Payback period will increase, Profitability will decrease, and Accounting rate of return will increase. Payback period will not change, Profitability will decrease, and Accounting rate of return will not change. Payback period will not change, Profitability will increase, and Accounting rate of return will decrease. Payback period will decrease, Profitability will increase, and Accounting rate of return will decrease.

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		Increase its days inventory and days receivable and decrease days payable
		Decrease days inventory and increase days receivable and days payable
		Decrease days inventory, days receivable and days payable
		Decrease days inventory and days receivable and increase days payable
		Decrease cost of goods sold and interest expense