Lecture 3

Question 1

Defining supply chain finance (SCF)

Answer 1

SCF is a set of financial practices and tools that optimize the flow of cash within a supply chain.

Question 2

Reverse factoring is…

Answer 2

a financial arrangement where the buyer initiates the process, guaranteeing payment to the supplier through the financial institution.

Question 3

How does reverse factoring work?

Answer 3

1. The buyer approves an invoice from the supplier.
2. The supplier sells the invoice to the financial institution at a discount.
3. The financial institution pays the supplier early, and the buyer reimburses the financial institution later.

Question 4

What is the effect of reverse factoring:

Answer 4

It improves cash flow for suppliers and strengthens the buyer-supplier relationship. When the buyer guarantees payment, lowering the risk for the financial institution.

Question 5

The key difference between factoring and reverse factoring is…

Answer 5

who initiates the process and benefits most. In afctoring teh supplier gets money first, while in reverse factoring the buyer ensures payment first.

Question 6

C2C =

Answer 6

= DSI + DSO – DPO

Question 7

DSO:

Answer 7

Days receivable outstanding. Time taken to collect receivables.

Question 8

DSO=

Answer 8

(Account recivables)/(Sales Revenue/365)

Question 9

DSI:

Answer 9

Day sales Inventory. Time inventory stays unsold.

Question 10

DIO:

Answer 10

Day Inventory Outstanding. Time inventory stays unsold.

Question 11

DSI is the same as…

Answer 11

DIO

Question 12

DSI=

Answer 12

Inventory/(Cost of sales/365)

Question 13

Average inventory =

Answer 13

(beginning inventory + ending inventory)/2

Question 14

DPO:

Answer 14

Dayes Payable Outstanding. Time taken to pay suppliers.

Question 15

DPO =

Answer 15

(Account payables)/(Total Operating goods sold(COGS)/365)

Question 16

C2C:

Answer 16

measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cycle indicates efficient cash flow management.

Question 17

APT:

Answer 17

The Accounts Payable Turnover (APT) measures how efficiently a company pays its suppliers.

Question 18

INVT:

Answer 18

The Inventory Turnover (INVT) measures how efficiently a company sells and replaces its inventory. A higher INVT indicates efficient inventory management (quick turnover).

Question 19

ART:

Answer 19

The Accounts Receivables Turnover (ART) measures how efficiently a company collects receivables from its customers. A higher ART indicates efficient credit management.

Question 20

APT=

Answer 20

COGS/Avergae account payables

Question 21

INVT=

Answer 21

COGS/Avergae invetory

Question 22

ART =

Answer 22

Sales/ average account recivables

Question 23

INVT –> DIO =

Answer 23

(1/INVT*365)

Question 24

DIO –> INVT =

Answer 24

DIO (Days Inventory Outstanding): 365/INVT