Relative to cash flows affecting net working capital, all of the following are true EXCEPT ... cash outlays for current liabilities are relatively predictable. cash inflows are generally more predictable than cash outlays. the more predictable the cash inflows, the less net-working capital a firm needs. since most firms cannot match cash inflows and outflows with certainty, current assets that more than cover outflows of current liabilities are necessary.

Q: Relevant cash inflows and outflows in a discounted cash flow analysis are the differences in…

A: True

Q: A conservative approach to reinvesting projected cash flows (the reinvestment assumption) would use…

A: “Hey, since there are multiple different questions posted, we will answer first question. If you…

Q: An analyst who is interested in assessing a company’s fi nancial position is most likely to focus on…

A: Financial statement includes statement of cash flows, Balance sheet and Profit and loss statement.

Q: The accrual accounting rate-of-return method has a significant weakness for use in making capital…

A: The accrual accounting rate of return refers to the percentage of return that is ecpected form the…

Q: Assuming that we are not able to accurately predict cash flows , generally decreased risk is thought…

A: Cash flow at risk at risk tells us how changes in market factors can change the future cash flows.…

Q: Describe the procedure of Estimating Risky Cash Flows?

A: Risky cash flow means the future cash flow which falls short of the expectations. This shortage may…

Q: Explain how each of the following factors would probably affect a firm’starget cash balance if all…

A: Treasury bills are short term obligations of the government with the maturity of less than one year.…

Q: On Capital Budgeting and Investment * Statement I: Accounting rate of return does not recognize the…

A: The questions are related to Capital Budgeting. The Accounting rate of return is traditional…

Q: Why is the predictability of cash flow so important?

A: Cashflow is defined as the movement of cash into and outside the business in order to facilitate the…

Q: Which of the following statements is correct? The NPV method assumes that cash flows will be…

A: Solution:- Net Present Value (NPV) means the net of the present value of cash inflows and initial…

Q: Is a negative free cash flow (FCF) always a bad sign? A negative free cash flow means that the…

A: Yes. Negative free cash flow is not necessarily bad. Most rapidly growing companies have negative…

Q: Operating cash flows reflect changes in the level of net working capital. The statement is :  a…

A: Operating cash flow is the cash generated from business operations. It shows whether a company can…

Q: What methods can be used to delay a firm’s cash outflows?

A: Cash Outflows: It is the cash that go away from a business. Such cash can be used for paying staff…

Q: Holding everything else constant, an increase in cash will decrease Omay increase or decrease O will…

A: Net debt is a financial metric that represents the difference between the company's total debt and…

Q: 1. Explain how capital reduces banking risks. Discuss the importance of cash flows and economic…

A: Capital reduces banking risks:  It reduces banking risk by protecting against insolvency. It is used…

Q: How can an analyst approach forecasting a company’s future net income and cash fl ow?

A: Analyst always tries to use a look-ahead basis while projecting the net income and cash flow. The…

Q: Calculate the present value and future value of an uneven cash flow showing how to value common…

A: The concept of the time value of money states that the current worth of money is more than its value…

Q: Do we use the term risk to describe an investment project where cash flows are not known in advance…

A: Cash flows refer to the amount of net cash and cash equivalents that flow in and out of the…

Q: Which of the following statements is not correct   O a. Cash balance does not have an opportunity…

A: 1.A firm may hold surplus cash balance to pay dividend to its shareholders. It is correct…

Q: Economic exposure represents the impact of exchange rate fluctuations on a firm’s future cash flows

A: The answer along with the explanation is provided below:

Q: Statement of financial position information is useful for all of the following except to Group of…

A: Statement of financial position is the Balance Sheet.  Balance Sheet represents the assets,…

Q: 20. Which of the following statement is CORRECT? Assume that the project being considered has normal…

A: The question pertains to the capital budgeting tool of IRR. IRR is the internal rate of return. It…

Q: Which of the following is not a source of funds for immediate liquidity purposes? Question 9Answer…

A: The correct answer is "Proceeds from an IPO"Initial Public Offering is the issue of shares by the…

Q: echnical problems associated with the internal rate of return include:

A: IRR (Internal Rate of Return): It is the rate of return that makes the net present value of the…

Q: Cash flow means inflow: and outflow of cash. An inflow source of cash increases the total cash…

A: The cash flows statement is a part of the financial statement which shows the cash inflows and cash…

Q: Question 2   Which one of the following methods of analysis could completely ignore some cash flows?…

A: Capital Budgeting involves various techniques which are used to evaluate different proposals to make…

Q: What contrasts are there between what is shown in cash flow statements and the need for firms to…

A: Cash flow statement is prepared on cash basis and it shows the actual cash position of the company.…

Q: What methods can be used to speed up a firm’s cash inflows?

A: Cash inflows:Cash inflow can be defined as cash or money attained by an institution, firm or company…

Q: Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that…

A: This model is developed so that return rate required on investment based of the expected risk and…

Q: Consider the following statements concerning the payback method of investment appraisal. 1. It…

A: The payback method of investment appraisal is a simple technique that calculates the amount of time…

Q: The Payback Method in capital budgeting ignores:  a The expected future cash flows of the firm.  b…

A: In capital budgeting, the payback period is the period of time required for the return on an…

Q: How can we estimate Risky Cash Flow?

A: Companies always predict the cash flows related with the project because it helps to company to…

Q: If you do not have past data to generate cash flows forecasting, which approach should you adopt for…

A: Valuing a new non-public company without past data for cash flow forecasting can be a challenging…

Q: Forecasted cash amount much lower than the normal level of cash can be adjusted by    investment…

A: Cash is the readiest form of liquid asset in the company. Forecasting cash balances by estimating…

Q: Balance Sheet Insolvency occurs when Liabilities are greater than the Assets resulting in negative…

A: Insolvency Risk: Insolvency risk is a probability that an enterprise cannot satisfy its debt…

Q: 13. Consider the following two statements: Statement 1: If nominal cash flows are used in…

A: Concept. according to fischer effect , (1+Nominal rate) = (1+ real rate) ( 1+ inflation rate). Thus…

Q: Reinvestment risk occurs when a financial institution holds longer-term assets relative to…

A: Reinvesting means putting the profit back into the same scheme.

Q: why discounted cash flow methods are preferred to the more traditional techniques of payback and…

A: The term "discounted cash flow" (DCF) designates a technique for valuing investments that determines…

Q: Question1. Arbitrage is limited because the wealth of arbitrageurs is limited.  Discuss this…

A: 1. Arbitrage, the practice of exploiting price differences of identical or similar financial…

Q: What are some actions a firm can take to shorten its cash conversion cycle?

A: The cash conversion cycle is the time period between the out flow of cash for purchasing raw…

Q: Consider the following statement: "The estimation of the Free Cash Flow to the Firm (FCF) considers…

A: The investment decisions are the planned activities related to allocating the financial resources in…

Q: Define net operating cash flows. Briefly explain why periodic net operating cash flows may not be a…

A: Definition: Net operating cash flow: The net operating cash flow refers to the total transactions…

Q: Question 5 Which of the following is not a pro of DCF valuation?: It's very robust to assumptions…

A: The objective of the question is to identify which of the given options is not an advantage of using…

Q: For Discounted Cash Flows to be useful, individual investors and companies must estimate a discount…

A: Solution: Discounted cash flow technique is the technique used to determine whether a project should…

Liquidity Risk Exposure

Answer: c