f the following is false? a. Baumol model helps firm to find out their desirable level of cash balance under certainty b. Any presence of a cash buffer affects the cost of holding cash and ultimately the annual cost of cash for a particular firm c. A higher average daily disbursement float than average daily collection float is more desirable for a firm d. Accounts payable increase the number of days a firm’s resources are t

f the following is false? a. Baumol model helps firm to find out their desirable level of cash balance under certainty b. Any presence of a cash buffer affects the cost of holding cash and ultimately the annual cost of cash for a particular firm c. A higher average daily disbursement float than average daily collection float is more desirable for a firm d. Accounts payable increase the number of days a firm’s resources are t

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 6QE

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An advantage of this method is that it highlights how a capital investment can affect a company’s liquidity. Select one: a. Payback Method b. Accounting Rate of Return Method c. Time Value of Money d. Discounted Cash Flow Techniques. Need typed answer only.Please give answer within 45 minutes
True or False The cash conversion cycle is the sum of the inventory conversion period, the receivables collection period, and the days payables outstanding. * True False The best and most comprehensive picture of a firm's liquidity position is obtained by examining its cash budget. * True False A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing. * True False The larger the investment a firm makes in its current assets, the higher its carrying costs will be. * True False Other things held constant, if a firm "stretches" (i.e., delays paying) its accounts payable, this will lengthen its cash conversion cycle (CCC). * True False Short-term financial policies that are flexible with regard to current assets includes keeping large balance of short-term debt. * True False Costs that fall with increases in the level of investment in current assets are called shortage costs. *…
A manager in a MNC should understand that appreciation in a firm's local currency causes a ____ in cash inflows and a ____ in cash outflows. A. increase; reduction B. reduction; reduction C. increase; increase D. reduction; increase
TRUE OR FALSE 1. The best and most comprehensive picture of a firm's liquidity position is obtained by examining its cash budget. 2. A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing. 3. The larger the investment a firm makes in its current assets, the higher its carrying costs will be.
Which of the following statements is NOT CORRECT? a. The cash budget is useful for estimating potential funding needs, especially for short-term working capital loans. b. Working capital management is critical because it affects financing decisions and the firm's profitability. c. Credit policy affects working capital because it impacts both sales and the time it takes for receivables to be obtained. d. If a company needs to increase its cash flow from operations in the next month or two, it can change its credit policy from 2/10 net 30 to net 60. e. f a company is unsure about the volume of sales, profits, and cash flows for the coming year, it will retain a relatively large amount of cash and marketable securities.
The term "additional funds needed (AFN)" is generally defined as follows: a. A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant. b. The amount of assets required per dollar of sales. c. Funds that are obtained automatically from routine business transactions. d. Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations. e. The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
All else the same, which of the following management decisions would help alleviate the problem of a buildup of excess cash? O Increase credit terms to customer; i.e. allow them more time to pay Borrow short term to increase the size of the Interest Tax Shield O Reduce credit terms to customers: i.c. make them pay sooner O Reduce the dividend payout ratio to crcate higher levels of retained earnings In evaluating the accuracy of your forecast, which of the following might be indicative of the need for a revised forecast? O The company's Dividend Payout Ratio is likely too high in the forecast period O The growth rate of Sales is trending toward 4-5% over the forecast period O The ratio of Sales/(Invested Capital) is much higher in the forecast period than in the Historical period from which you derived your forecast O The firm's Forecast D/E ratio is holding steady over the course of the forecast An effective financial plan can be either static or dynamic (True or False) O True False
1. Which firm is more likely to borrowing money in the future, a rapidly growing firm that is expanding its markets before the competition "copies" its product or service or a mature company like Procter and Gamble with established mature brands? Explain. 2. Are cash flows constant over time for most firms or do they vary across the life cycle of the typical firm? Explain.
Explain how the EOQ inventory model can be modified and used to help determine the optimal sizeof a firm’s cash balances. Do you think the EOQapproach to cash management is more or less relevant today than it was in precomputer, preelectronic communications days?
The company’s usage of the Baumol model in cash management involves trade-off. A decrease in the optimal transaction size would more likely result from a. Increase of return on marketable securities b. None of the choices is correct c. Increase in the annual demand for cash d. Decrease of debt to asset ratio
Select all of the following that will have a negative effect on the firm's cash flows? (Assume other variables remain constant, no change in revenues, etc.) O Increase in Inventory Decrease in Accounts Payable Increase in Accounts Receivable Increase in Working Capital Decrease in Accounts Receivable Decrease in Inventory Increase in Accounts Payable
1. should the terminal cashflow be used to calculate the net present value of a company? Give reasons for your answer. 2. Calculate the net present value (NPV) with the information in the attached table.