M4-Working Capital Management: Part 1 Flashcards Preview

BEC 2 - Financial Management > M4-Working Capital Management: Part 1 > Flashcards

Flashcards in M4-Working Capital Management: Part 1 Deck (15):
1

The use of a ______ delays a cash disbursement and increases payable float.

draft

2

A _______ system is used to accelerate the inflow of funds.

lock box

3

The optimal level of inventory is affected by:

1. The time required to receive inventory
2. The cost per unit of inventory, which will have a direct impact on inventory carrying costs.
3. The cost of placing on order impacts order frequency, which affects order size and optimal inventory levels.

4

__________ is an inventory management technique that projects and plans inventory levels in order to control the usage of raw materials in the production process.

Materials Requirements Planning (MRP)

MRP primarily applies to work in process and raw materials.

5

_______ is a concept applied to both manufacturing and finished goods inventory to ensure that supply requirements are met.

Safety stock

6

___________ is an inventory model that attempts to minimize both ordering and carrying costs. The objetive of the ______ is to compute the quantity to order,not to comprehensively plan the requirements of production inventories.

Economic Order Quantity (EOQ)

The EOQ anticipates orders at the point where carrying costs are nearest to restocking costs. The objective of EOQ is to minimize total inventory costs.

The EOQ assumes that periodic demand is KNOWN. annual sales volume is a crucial variable in the EOQ formula.

The carrying cost per unit is anticipated to remain constant.

The cost of placing an order is anticipated to remain constant.

7

Reorder costs do not impact the level of safety stock. (true or false)

true

8

Inspections are part of order costs, not carrying costs. (true or false)

true

Inventory carrying costs include all costs associated with warehousing (storing) inventory (e.g., storage, insurance, obsolescence, and spoilage associated with holding inventory)

9

When the economic order quantity (EOQ) model is used for a firm that manufactures its own inventory, ordering costs consist primarily of production set-up. (true or false)

true

10

Trade credit generally provides the largest source of short-term credit for small firms. (true or false)

true

Trade credit is subject to risk of buyer default.
Trade credit is usually an expensive source of external financing.
Trade credit is not a source of long-term financing to the seller.

11

Accounts payable provide a spontaneous source of financing for a firm. (true or false)

true

12

The "deliver" process encompasses all activities of getting the finished product into the hands of the ultimate customers to meet their planned demand. Managing accounts receivable and collections from customers falls into the "deliver" process. (true or false)

true

13

The process of "planning" consists of developing a way to properly balance aggregate demand and aggregate supply within the goals and objectives of the firm and plan for the necessary infrastructure. Assessing the ability of the suppliers to supply resources is part of the "plan" process. (true or false)

true

Assessing capacity concerns and capabilities
Determining demand requirements
making make/buy decisions
are all examples

14

The "make" process encompasses all the activities that turn the raw materials into finished products that are produced to meet a planned demand. Implementing changes in the engineering process falls into the "make" process. (true or false)

true

15

Once demand has been planned, it is necessary to procure the resources required to meet it and to manage the infrastructure that exists for the sources. Collecting and processing vendor payments falls into the "source" process. (true or false)

true

Selecting vendors is a source decision not a plan decision.