Company has experienced a stochastic demand for its product, which results in fluctuating cash balances randomly. Determine the optimal cash balance, and average cash balance. check the attached photo for addi

Company has experienced a stochastic demand for its product, which results in fluctuating cash balances randomly. Determine the optimal cash balance, and average cash balance. check the attached photo for addi

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which statement is correct A. Firms Cabot use lockboxes if they use cash concentration accounts. B. Firms prefer to increase delay on disbursements. C. Firms prefer to eliminate all types of float. D. Firms open regional offices so their employees can pick up lockbox payments throughout the day. E. The check clearing act for the 21st century is designed to reduce total collection time to one day.
Which among the following is not recommended for solving cash problems of a business? a.Arrange for overdraft facilities in case a shortage is forecasted b.Allowing extra time to customers to pay off bills so as to boost the sales. c.Finding a cheaper source of supply of raw materials d.Disposing off assets that are not being put to effective use
Assuming all other variables stay the same, an increase in accounts payable would cause cash flow from operations to decrease. True False Give typing answer with explanation and conclusion
When a firm increases its days of accounts receivable outstanding, it generally: Group of answer choices None of the answers are correct does not change its cash position releases additional cash locked up in A/R has additional cash locked up in A/R
An intern at Block Financials, specializing in block chain transactions is preparing the operating activities section of the statement of cash flows. How is a decrease in current liabilities handled? Multiple Choice It is subtracted from net income in the cash flows fror operating activities section. It is added to inventory purchases in the cash flows from investing activities section. It is added to net income in the cash flows from operating activities section. It is subtracted from current assets in the cash flows from financing activities section.
Rate-based statistics (such as payback and discounted payback) represent summary cash flows, and these summaries tend to lose which two important details? O The investment size and the cash outflows that occur before the testing period O The investment size and the cash inflows that occur during the testing period O The investment size and the cash inflows that occur before the testing period O The investment size and cash inflows that occur after the rather arbitrary testing period
Webster provides the following information regarding its actual and future sales: February March April January Actual May Actual Forecast Forecast Forecast Cash Sales $ 50,000 $ 80,000 $ 90,000 $ 100,000 $ 120,000 Credit Sales 80,000 $ 12,000 $ 90,000 $ 40,000 $ 60,000 Management expects that 40% of credit sales are collected in the month of the sale. 40% are collected in the month after the month of sale. 20% are collected in the month following. na memo to your team (who are preparing the budgets), management also provides the following information: - The company has an obligation to repay $120,000 in debt in April. There is no debt to be repayed in the other months - Cost of sales is 50% of sales revenue. - The company has regular deliveries of inventory to ensure that it can continue to meet its customer obligations. Inventory deliveries are paid in the following month and expected to be equal to 60% of sales in the delivery month. - Salaries and wage expenses add up to $10,000 per…
Multiple choice: 1. The first and most important step in cash flow planning is A. Submit historical records B. Forecasting your sales revenue C. Estimate your expenses D. Determine the promotion expenditure 2. Why cash flow so important? A. The business runs out of cash B. Cash outflows must exceed inflows C. Imbalance is for only a short period of time D. Cash inflow must exceed cash outflows
Suppose Leonard, Nixon, & Shull Corporation’s projected free cash flow (FCF) for next year is $750,000, and FCF is expected to grow at a constant rate of 4% indefinitely. If the company’s weighted average cost of capital is 10%, what is the value of its operations? a. $18,750,000 b. $12,500,000 c. $7,500,000 d. $13,000,000 e. $10,833,333
How will a firm's cash cycle be affected if one of the firm's suppliers that was only accepting cash payment before, now offers a trade credit to the firm, all else being equal (select the best choice below)? 1. If one of the firm's suppliers that was only accepting cash payment before, now offers a trade credit to the firm, its accounts payable days will increase. All else equal, this will cause the cash cycle of the firm to decrease. II. If one of the firm's suppliers that was only accepting cash payment before, now offers a trade credit to the firm, its accounts receivable days will increase. All else equal, this will cause the cash cycle of the firm to increase. III. If one of the firm's suppliers that was only accepting cash payment before, now offers a trade credit to the firm, its accounts payable days will decrease. All else equal, this will cause the cash cycle of the firm to decrease. IV. If one of the firm's suppliers that was only accepting cash payment before, now offers a…
Why is cash generated from operations usually larger than net profit? A business commentator made the following remark during a discussion of the financial performance of a large, but struggling, company: These accountants spend lots of money to create complicated financial statements, especially income statements, which use what they call ‘accrual’ accounting. Then they take away all the accruals and supposedly return us to the cash profit number (‘cash flow from operations’) we would have had anyway, if they hadn’t bothered with accrual accounting in the first place! Why don’t they just give us the cash profit and leave it at that? If you were an accountant involved in the discussion, and everyone turned to you to hear your response to the commentator, what would you say?
Indicate how you would expect the following strategies to affect the company’s net cash flows from operating activities (1) in the near future and (2) in later periods (after the strategy’s long-term effects have “taken hold”). Fully explain your reasoning. a. A successful pharmaceutical company substantially reduces its expenditures for research anddevelopment.b. A restaurant that previously sold only for cash adopts a policy of accepting bank credit cards,such as Visa and MasterCard.c. A manufacturing company reduces by 50 percent the size of its inventories of raw materials(assume no change in inventory storage costs).d. Through tax planning, a rapidly growing real estate developer is able to defer significantamounts of income taxes.e. A rapidly growing software company announces that it will stop paying cash dividends for theforeseeable future and will instead distribute stock dividends.

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