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Chapter 22 Current Asset Management ANSWERS TO END-OF-CHAPTER QUESTIONS 22-1a. working(a) capital is a loyals investment in short-term assets-- capital, marketable securities, line, and accounts receivable. boodle working capital is current assets minus current liabilities. Working capital insurance policy refers to the basic policy decisions regarding (1) target levels for all(prenominal) category of current assets and (2) how current assets will be financed. b.A relaxed current asset investment policy refers to a policy chthonic which relatively large amounts of cash, marketable securities, and inventories are carried and under which sales are stimulated by a better-looking credit policy, resulting in a high level of receivables. A restricted current asset investment policy refers to a policy under which holdings of cash, securities, inventories, and receivables are minimized; while a moderate current asset investment policy lies between the relaxed and restricted policies. A moderate current asset finance policy matches asset and liability maturities. It is also referred to as the due date matching, or self-liquidating approach. c.

The cash transformation cycle is the length of clock between the potents actual cash expenditures on tillable resources (materials and labor) and its own cash receipts from the sale of products (that is, the length of sequence between paying for labor and materials and collecting on receivables.) Thus, the cash conversion cycle equals the length of time the firm has finances tied up in current assets. The cash conversion cycle model has been developed to formalize the calculation of the cycle. The inventory conversion period is the intermediate length of time to vary materials into finished goods and then to sell them. It is calculated by dividing fare inventory by sales per day. The receivables collection period is the average length of time required to convert a firms receivables into cash. It is calculated by... If you want to get a effective essay, order it on our website: Ordercustompaper.com

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