fickernuit's version from 2017-06-07 17:41


Question Answer
the time required to receive inventory, sell it, and collect on the receivables generated from the sale of the inventory.Operating Cycle
number of days the inventory sits on the shelf (from purchasing to selling)Inventory period
number of days it takes to collect receivableAccounts receivable period
focuses on the length of time between when a company makes payments to its creditors and when a company receives payments from its customerscash conversion cycle
This is the firm’s investment in the current assetsGross Working Capital
It involves setting up working capital policy and carrying out that policy in day-to-day operations.Working Capital Management
Inventories are financed by suppliersZero Working Capital
Indication of holding a great deal of current assets, Liberal credit policyRelaxed Policy
Tight policy on current assetsRestricted Policy
Temporary assets that will be liquidated and NOT replaced within the current yearTemporary Investment
Assets that the firm expects to hold for a period longer than one yearPermanent Investment
DuPont AnalysisProfit Margin * TATO * Equity Multiplier
Financing sources that arise naturally out of day-to-day operations. (trade credit, accrued expenses like salaries, utilities, interests)Spontaneous Financing
Current liabilities that the firm incurs on a discretionary basis. (short-term loans)Temporary Financing
Long-term sources of discretionary financing used by the firm. (long-term loans, issuance of bonds and/or stocks)Permanent Financing
Also called “maturity matching” and “moderate approach,” it states that the maturity of source of financing should be matched with the length of time the financing is neededSelf-Liquidating Approach
The firm finances its permanent assets (partly current, partly non-current) with short-term debtAggressive Approach
The firm uses long-term borrowings to finance all permanent assets and to meet seasonal needs.Conservative Approach