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Flashcards in Chapter 7 Deck (14)
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1

Float

time period between mailing of a check and the collection period

2

Types of floats (2)

1. mail float: time it takes for mail to be delivered
2. clearing float: time it take a check to clear

3

Lockbox system

procedure used to expedite cash inflows by which customers forward their checks to post offices in their region and a local bank collects and processes them. The funds are then wired to the corporate home office for their use

4

Sweep accounts

allows company to maintain 0 balances
excess cash is swept into an interest earning account

5

commercial paper

usually not back by collateral
- short term investment (non-govermental securities)
- no existing secondary market

6

bankers acceptances

exporter who holds acceptance can sell it on a discount basis to any buyer and receive the money before the importer receives the goods

7

Credit risk based on 5c's

Character: moral quality of borrower
Capital: financial resources of buyer
Capacity: enough cash flow to pay debt
Conditions: economic conditions
Collateral: asset backing loan

8

Inventory

least liquid so should provide highest yield

9

level production

max. efficiency in manpower and machinery usage
- may result in high inventory buildup

10

seasonal production

-eliminates inventory buildup problems
-overtime wages and inefficiencies in equipement use

11

stock out

firm is out of a specific inventory item

12

safety stock

reduces risk of losing sales, but increases costs

13

advantages of JIT (4)

1. reduction in space
2. reduced construction and overhead expenses
3. reduction in costs from quality control
4. elimination of waste

14

negatives of JIT (2)

1. integration costs
2. inventory shortages leading to lost sales