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CHAPTER 6
MANAGING CASH FLOW
True-False Questions
and obtaining seed financing occurs during a venture’s development stage.
needs, and obtaining first-round financing occurs during a venture’s survival
stage.
cycle stage.
operations not yet turning a profit and the associated cash burn often lead to a
venture’s inability to pay its maturing liabilities.
lack of operating profits to fund working capital and fixed asset investments
needed to support sales growth.
short-term financial forecasts are never required of early-stage ventures.
their development or startup stages.
with little to no access to short-term lending markets can hinder operations
until the next round of financing.
cycle stage.
purchases schedule, a wages and commissions schedule, and a cash budget.
financial statements and focuses on identifying and planning for net income
demands on the business.
Chapter 6: Managing Cash Flow
39
purchases schedule, and wages and commissions schedule.
forecast period.
determine whether there will be a cash need, the maximum size of the cash
need, and whether the need can be repaid during the year.
certain current assets and current liabilities into cash.
payment conversion period minus the sale-to-cash conversion period is called
the cash conversion cycle.
net income.
principal on a loan.
revenues by net sales per day.
payment conversion period increases.
Multiple-Choice Questions
following except?
a. rapid growth stage
b. startup stage
c. development stage
d. survival stage
e. early-maturity stage
cycle stages:
a. development stage
Chapter 6: Managing Cash Flow
40
b. startup stage
c. survival stage
d. rapid-growth stage
e. early-maturity stage
following life cycle stages:
a. development stage
b. startup stage
c. survival stage
d. rapid-growth stage
e. early-maturity stage
a. time it takes to purchase products
b. time it takes to produce products
c. time it takes to sell the products
d. time it takes to pay suppliers
e. time it takes to collect receivables
committed to the extension of trade credit?
a. sale-to-cash conversion period
b. inventory-to-sale conversion period
c. purchase-to-payment conversion period
d. cash conversion cycle period
goods sold into the average inventory?
a. sale-to-cash conversion period
b. inventory-to-sale conversion period
c. purchase-to-payment conversion period
d. cash conversion cycle
materials and labor to actual cash payment?
a. sale-to-cash conversion period
b. inventory-to-sale conversion period
c. purchase-to-payment conversion period
d. cash conversion cycle
complete its operating cycle after deducting the days supported by trade credit
and delayed payroll financing?
a. sale-to-cash conversion period
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41
b. inventory-to-sale conversion period
c. purchase-to-payment conversion period
d. cash conversion cycle
length of the cash conversion cycle?
a. inventory-to-sale conversion period
b. sale-to-cash conversion period
c. purchase–to-payment conversion period
d. fixed assets-to-usage conversion period
cash conversion cycle?
a. inventory-to-sale conversion period
b. sale-to-cash conversion period
c. purchase-to-payment conversion period
d. fixed assets-to-usage conversion period
information: average inventories = $120,000; average receivables = $90,000;
average payables = $40,000; cost of goods sold = $182,500; and net sales =
$365,000.
a. 240.0 days
b. 180.0 days
c. 90.0 days
d. 60.0 days
e. 45.0 days
information: average inventories = $120,000; average receivables = $90,000;
average payables = $40,000; cost of goods sold = $182,500; and net sales =
$365,000.
a. 240.0 days
b. 180.0 days
c. 90.0 days
d. 60.0 days
e. 45.0 days
conversion cycle: Inventory-to-sale conversion period = 112.9 days; Sale-to–
cash conversion period= 57.1 days; and Purchase-to-payment conversion
period = 76.8 days.
a. 170.0 days
b. 189.7 days
c. 93.2 days
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d. 246.8 days
e. 133.9 days
inventory-to-sale conversion period = 112.9 days; sale-to-cash conversion
period = 57.1 days; and purchase-to-payment conversion period = 76.8 days.
a. 93.2 days
b. 132.6 days
c. 170.0 days
d. 246.8 days
e. 365.0 days
(rounded to thousands of dollars) that were outstanding: Net sales = $575,000;
Sale-to-cash conversion period = 57.1 days; Purchase-to-payment conversion
period = 76.8 days; and Cost of goods sold = $380,000.
a. $90,000
b. $180,000
c. $121,000
d. $31,000
e. $41,000
sale conversion period: cash conversion cycle = 250 days; sale-to-cash
conversion period = 60 days; and purchase-to-payment conversion period = 70
days. a. 70 days
b. 140 days
c. 240 days
d. 260 days
e. 330 days