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Flashcards in Working capital 1 Deck (20):
1

A working capital technique that delays cash outflow

A draft.

Reduces cash disbursement and increases payable float.

2

Cost of credit formula / APR of quick payment discount

360/ pay period - discount period X Discount/ 100 - Discount %

3

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

4

Inventory amounts held on stock would decrease in which conditions?

Variability of sales decreases

Cost of running out of stock decreases

Length of time that goods are in transit decreases

5

Inventory held on hand would increase when?

When carrying cost decrease

6

Economic order quantity (EOQ)

anticipates orders at the point where carrying costs are nearest to restocking costs. Objective is to minimize total inventory cost.

7

EOQ formula assumes that

- Periodic demand is known.

- Annual sales volume is a crucial variable in the formaula

8

TRUE/FALSE?

The cost of not taking a cash discount is generally higher than the cost of a bank loan

True

9

Reorder costs do not impact

The level of safety stock

10

Reorder point formula

Safety stock + ( Lead time X Sales during lead time)

11

Inspections are part of what cost?

Order cost

12

Inventory carry cost include

- Insurance
- Obsolescence and spoilage
- Opportunity cost on inventory investment
- Cost of capital invested in the inventory

13

In the EOQ model order costs consist primarily of

Production set-up

14

The following financial instruments generally provides the largest source of short-term credit for small firms

Trade credit

15

What provides a spontaneous source of financing for a firm?

Accounts payable

16

Trade credit is

Subject to risk of buyer default

17

In the SCOR (Supply Chain Operations Reference) model what are the key activities pertaining to the supply chain analysis?

Plan
Source
Make
Deliver

18

(SCOR) Describe Planning stage

Developing a way to manage supply and demand within the goals and objectives of the firm. As well as plan for necessary infrastructure.

19

Just-in-time (JIT) inventory purchasing system

- relies on suppliers to deliver products when needed

- Increases the likelihood of the company running out of inventory

- decreases inventory holding cost

-reduces set-up time

-increases inventory turnover and number of days sales to sell goes down as well as cash conversion cycle

20

Variability in lead times affect safety stock in what way?

It increase safety stock in order to reduce the risk of stock outs.