Chapter 16 Flashcards PDF

8/27/13
MindTap - Cengage Learning
1.
regular, or simple, interest
3.
2.
restricted
4.
Payables deferral period
maturity matching, or self-liquidating,

approach
5.
6.
Free trade credit
credit scores
7.
8.
Collection policy
secured loans
9.
10.
cash conversion cycle (CCC).
cash budget
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2.
1.
Holdings of cash, marketable securities,

inventories, and receivables are
constrained.
The situation when interest only is paid

monthly.
4.
3.
A financing policy that matches the

maturities of assets and liabilities. This is
a moderate policy.
6.
The average length of time between

the purchase of materials and labor and
the payment of cash for them.
5.
A numerical score that indicates the

likelihood that a person or business will
pay on time.
Credit received during the discount

period.
8.
7.
A loan backed by collateral, often

inventories or accounts receivable.
10.
A table that shows cash receipts,

disbursements, and balances over some
period.
Degree of toughness in enforcing the

credit terms.
9.
The length of time funds are tied up in

working capital, or the length of time
between paying for working capital and
collecting cash from the sale of the
working capital.
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11.
12.
Discounts
target cash balance
13.
14.
relaxed investment policy
account receivable
15.
16.
permanent current assets
Commercial paper
17.
18.
accruals
prime rate
19.
20.
add-on interest
moderate investment policy
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12.
The desired cash balance that a firm

plans to maintain in order to conduct
business.
11.
Price reductions given for early

payment.
13.
14.
Funds due from a customer.
Relatively large amounts of cash,

marketable securities, and inventories
are carried, and a liberal credit policy
results in a high level of receivables.
16.
Unsecured, short-term promissory notes

of large firms, usually issued in
denominations of $100,000 or more
with an interest rate somewhat below
the prime rate.
Current assets that a firm must carry

even at the trough of its cycles.
18.
17.
A published interest rate charged by

commercial banks to large, strong
borrowers.
20.
An investment policy that is between

the relaxed and restricted policies.
15.
Continually recurring short-term

liabilities, especially accrued wages and
accrued taxes.
19.
Interest that is calculated and added to

funds received to determine the face
amount of an installment loan.
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21.
22.
line of credit
Credit policy
23.
24.
lockboxes
credit terms
25.
26.
Inventory conversion period
Credit period
27.
28.
promissory note
revolving credit agreement
29.
30.
Costly trade credit
spontaneous funds
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22.
A set of rules that include the firm's

credit period, discounts, credit
standards, and collection procedures
offered.
24.
Statement of the credit period and any

discount offered.
26.
The length of time customers have to

pay for purchases.
28.
A formal, committed line of credit

extended by a bank or other lending
institution.
30.
Funds that are generated

spontaneously as the firm expands.
21.
An arrangement in which a bank agrees

to lend up to a specified maximum
amount of funds during a designated
period.
23.
A post office box operated by a bank to

which payments are sent. Used to speed
up effective receipt of cash.
25.
The average time required to convert

raw materials into finished goods and
then to sell them.
27.
A document specifying the terms and

conditions of a loan, including the
amount, interest rate, and repayment
schedule.
29.
Credit taken in excess of free trade

credit, whose cost is equal to the
discount lost.
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31.
32.
Credit standards
trade credit
33.
34.
Average collection period (ACP)
temporary current assets
35.
36.
current assets financing policy
red-line method
37.
38.
two-bin method
computerized inventory control systems
39.
40.
outsourcing
discount interest
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32.
Debt arising from credit sales and

recorded as an account receivable by
the seller and as an account payable by
the buyer.
34.
Current assets that fluctuate with

seasonal or cyclical variations in sales.
36.
31.
The financial strength customers must

exhibit to qualify for credit.
33.
The average length of time required to

convert the firm's receivables into cash,
that is, to collect cash following a sale.
35.
An inventory control procedure in

which a red line is drawn around the
inside of an inventory-stocked bin to
indicate the reorder point level.
The manner in which current assets are

financed.
38.
37.
A system of inventory control in which a

computer is used to determine reorder
points and to adjust inventory balances.
An inventory control procedure in

which an order is placed when one of
two inventory stocked bins is empty.
40.
39.
Interest that is calculated on the face

amount of a loan but is paid in advance.
The practice of purchasing components

rather than making them in-house.
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Chapter 16 Flashcards PDF

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8/27/13

MindTap - Cengage Learning

regular, or simple, interest

Payables deferral period

maturity matching, or self-liquidating,

Free trade credit

cash conversion cycle (CCC).

MindTap - Cengage Learning

Holdings of cash, marketable securities,

The situation when interest only is paid

A financing policy that matches the

The average length of time between

A numerical score that indicates the

Credit received during the discount

A loan backed by collateral, often

A table that shows cash receipts,

Degree of toughness in enforcing the

The length of time funds are tied up in

MindTap - Cengage Learning

target cash balance

relaxed investment policy

permanent current assets

moderate investment policy

MindTap - Cengage Learning

The desired cash balance that a firm

Price reductions given for early

Funds due from a customer.

Relatively large amounts of cash,

Unsecured, short-term promissory notes

Current assets that a firm must carry

A published interest rate charged by

An investment policy that is between

Continually recurring short-term

Interest that is calculated and added to

MindTap - Cengage Learning

Inventory conversion period

revolving credit agreement

Costly trade credit

MindTap - Cengage Learning

A set of rules that include the firm's

Statement of the credit period and any

The length of time customers have to

A formal, committed line of credit

Funds that are generated

An arrangement in which a bank agrees

A post office box operated by a bank to

The average time required to convert

A document specifying the terms and

Credit taken in excess of free trade

MindTap - Cengage Learning

Average collection period (ACP)

temporary current assets

current assets financing policy

computerized inventory control systems

MindTap - Cengage Learning

Debt arising from credit sales and

Current assets that fluctuate with

The financial strength customers must

The average length of time required to

An inventory control procedure in

The manner in which current assets are

A system of inventory control in which a