Question 1

Zoma Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:
 $$\begin{array} { | c | c | c | c | c | c | } 
\hline & \text { Navember } & \text { December } & \text { January } & \text { February } & \text { March } \
\hline \text { Sales } & \$ 90,000 & \$ 145,000 & \$ 170,000 & \$ 195,000 & \$ 205,000 \
\hline\text { Estimated Collection: }\
\hline 50 \% & \text { In month of sale } & & & \
\hline 30 \% & \text { In month after sale } & & & \
\hline 15 \% & \text { In second month after sale } & & & \
\hline 5 \% & \text { Never collected } & & & \
\hline

\end{array}$$

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Question 2

Noorie Corporation is planning its production and ending inventory for the next quarter.The CFO has provided you with the following information:
 $$\begin{array}{l}
\begin{array} { | l | c | } 
\hline \text { Data: }\
\hline \text { January Beginning Irventory } & 4,000 \
\hline \text { January Sales } & 60,000 \
\hline \text { Sales Growth per Year } & 8 \% \
\hline \text { Ending Inventory as } \% \text { of next Month Sales } & 15 \% \
\hline
\end{array}
\end{array}$$ Using this information, calculate ending inventory and production for January to March.

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Question 3

Globex Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:
 $$\begin{array}{ | c | c | c | c | c | c | } 
\hline & \text { Navember } & \text { December } & \text { January } & \text { February } & \text { March } \
\hline \text { Sales } & \$ 60,000 & \$ 80,000 & \$ 95,000 & \$ 105,000 & \$ 120,000 \
\hline\text { Estimated Collection: }\
\hline 75 \% & \text { In month of sale } & & & \
\hline 20 \% & \text { In month after sale } & & & \
\hline 5 \% & \text { In second month after sale } & & & \
\hline
\end{array}$$

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Question 4

Blanchard Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:
 $$\begin{array}{ | c | c | c | c | c | c | } 
\hline & \text { November } & \text { December } & \text { January } & \text { February } & \text { March } \
\hline \text { Sales } & \$ 250,000 & \$ 270,000 & \$ 290,000 & \$ 305,000 & \$ 315,000 \
\hline \text { Estimated Collection: }\
\hline 60 \% & \text { In month of sale } & & & \
\hline 30 \% & \text { In month after sale } & & & \
\hline 8 \% & \text { In second month after sale } & & & \
\hline 2 \% & \text { Never Collected } & & & \
\hline
\end{array}$$

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Question 5

Calculate the simple interest on a bank loan of $200,000 for a month, with a quoted rate of 6% simple interest.At the end of the month how much would you need to repay?

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Question 6

Create the statement of sources and uses of cash from the following entries:
 $$\begin{array} { | l | l | } 
\hline \text { Net Incorne } & \$ 1,000 \
\hline \text { Dividends } & 600 \
\hline \text { Increased inventory } & 80 \
\hline \text { Increased receivables } & 100 \
\hline \text { Depreciation } & 60 \
\hline \text { Increased payables } & 45 \
\hline \text { Increased long-terin debt } & 200 \
\hline \text { Increased fixed assets } & 475 \
\hline
\end{array}$$

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Question 7

Show the effect of the following transactions on cash, net working capital, and the current ratio.Assume that the current ratio exceeds 1.0 to begin.
The firm borrows $1,000 short-term and pays $500 in accounts payable.
The firm factors $1,000 in receivables at a 5% discount.
The firm issues $1,000 in long-term bonds, using the proceeds to pay $800 in payables and purchase $200 in marketable securities.

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Question 8

The text suggests that, of the three financing strategies shown, the relaxed strategy is probably the worst from the standpoint of managerial evaluation.Why is this thought to be the case, and when may it be an acceptable practice?

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Question 9

Select the best loan terms from the banks below.The firm needs to obtain $500,000 in cash:
Bank A: 10% stated rate, 20% compensating balance that earns no interest.
Bank B: 12.5% stated rate, no compensating balance.
Bank C: 11% stated rate, 15% compensating balance that earns 2.5% interest.

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Question 10

Why do firms need to invest in net working capital?

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Question 11

CumChan has issued commercial paper with a face value of $250,000 that will mature in 60 days.The present market value of the paper is $242,000.Interest on the paper is, therefore:

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Question 12

Firms are often known to pay commitment fees to banks for the privilege of receiving a line of credit.Does it make sense for a firm to pay for something that, at least at the present time, it does not know whether it will use?

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Question 13

How would you develop a model to analyze the benefits and costs of stretching payables? Assume that cash discounts will be forgone and that short-term bank funds are usually available.

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Question 14

How does long-term financing policy affect short-term financing requirements?

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Question 15

A firm is considering the following changes: increasing inventory variety which will increase average inventory by $10,000, and offering more liberal sales terms which will result in average receivables increasing to $65,000.These actions are expected to increase sales to $800,000 per year, and cost of goods will remain at 75%.Because of the increased purchases, average payables will increase to $35,000.What effect will these changes have on the cash conversion cycle?

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Question 16

How does the firm's sources and uses of cash relate to its need for short-term borrowing?

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Question 17

Create the statement of sources and uses of cash from the following entries:
 $$\begin{array} { | l | l | } 
\hline \text { Net Income } & \$ 1,000 \
\hline \text { Dividends } & 600 \
\hline \text { Increased invenitory } & 80 \
\hline \text { Increased receivables } & 100 \
\hline \text { Depreciation } & 60 \
\hline \text { Increased payables } & 475 \
\hline \text { Increased long-terin debt } & 200 \
\hline \text { Increased fixed assets } & 45 \
\hline
\end{array}$$

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Question 18

List and explain the four forecast uses of cash.

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Question 19

Discuss the usefulness of the concept of "maturities matching" in finance.

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Question 20

How do firms develop a short-term financing plan that meets their need for cash?

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Quiz 20: Short-Term Financial Planning