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Exam 6: Managing Cash Flow

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Question 1

True/False

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Early-stage ventures are defined as firms that are only operating in either their development or startup stages.

A) True
B) False

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False

Question 2

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Short-term financial planning is critical during the survival stage because operations not yet turning a profit and the associated cash burn often lead to a venture's inability to pay its maturing liabilities.

A) True
B) False

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Question 3

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Which of the following measures the average time it takes a firm to complete its operating cycle after deducting the days supported by trade credit and delayed payroll financing?

A venture's cash conversion cycle will decrease if the purchase-to-payment conversion period increases.

"First-round financing" usually occurs during a venture's rapid-growth life cycle stage.

Conversion period ratios show the average time in days it takes to convert certain current assets and current liabilities into cash.

Calculate the sale-to-cash conversion period based on the following information:average inventories = $120,000; average receivables = $90,000; average payables = $40,000; cost of goods sold = $182,500; and net sales = $365,000.

"First-round financing" usually occurs during a venture's rapid-growth life cycle stage.

Which of the following measures the average time from purchase of materials and labor to actual cash payment?

Based on the following information,determine the venture's inventory-to-sale conversion period: cash conversion cycle = 250 days; sale-to-cash conversion period = 60 days; and purchase-to-payment conversion period = 70 days.

Which one of the following conversion periods operates to reduce the length of the cash conversion cycle?

A cash budget shows a venture's projected revenues and expenses over a forecast period.

Short-term cash planning tools include preparation of a: sales schedule,a purchases schedule,a wages and commissions schedule,and a cash budget.

A firm is said to be an early stage venture when it is in which of the following except?

Which one of the following "measures" the average days of sales committed to the extension of trade credit?

A venture's operating cycle is the same as its cash conversion cycle.

The sale-to-cash conversion period is calculated by dividing average revenues by net sales per day.

Which one of the following conversion periods is not a component in the cash conversion cycle?

A venture's operating schedules typically include a: sales schedule,purchases schedule,and wages and commissions schedule.

Cash shortages during the rapid growth stage frequently derive from the lack of operating profits to fund working capital and fixed asset investments needed to support sales growth.