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FIN 401 Managerial Finance II Final Exam TIPS 2024 Toronto Metropolitan University
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FIN 401 Managerial Finance II Final Exam TIPS 2024 Toronto Metropolitan University
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FIN 401 Managerial Finance II Final Exam TIPS 2024 TorontoMetropolitan University
Factors that affect the best level of long-term financing relative to the cumulative capital
requirement? - --1. Matching Maturities 2. Permanent working capital requirement 3.
Maintaining liquidity
Steps to Preparing a Cash Budget - --1. Forecast the sources of cash 2. Forecast the uses of cash
3. Calculate whether the firm is facing a cash shortage or surplus
Accounts Receivable Ending Balance = - --Accounts Receivable beginning balance + sales -
collections
Dynamic Forecasted Uses of Cash - --1. Payments of Accounts Receivable 2. Labor,
Administrative, and other expenses 3. Capital Expenditures 4. Taxes, Interest, and Dividend
payments 5. Increase in Inventory (with expected increase in sales) - Increase in Accounts
Receivable
Net Cash Inflow = - --Total Sources - Total Uses
Net Working Capital (NWC) - --= current assets - current liabilities; Often called working capital;
Needs of NWC depend on its business process
Cash Conversion Cycle - --Period between firm's payment for materials and collection on its
sales
, Operating Cycle = - --Inventory period + accounts receivable period
Cash Conversion Cycle = - --(inventory period + accounts receivable period) - accounts payable
period
Inventory Period = - --inventory / (annual COGS/365)
Accounts Receivable Period = - --accounts receivable / (annual sales/365)
Accounts Payable Period = - --accounts payable / (annual COGS/365)
Credit Management Steps - --1. Establish terms of sale 2. What form of IOU will you require 3.
Perform a credit analysis 4. Create a credit policy 5. Develop a collection policy
Terms of Sale - --Credit, discount, and payment terms offered on a sale; ex. 5/10 net 30: 5 %
discount for early payment, 10 days that the discount is available for, net 30 number of days
before the payment is due
Effective Annual Rate (EAR) = - --(1 + (discount / discount price))^(365/extra days credit) -1
Credit Analysis - --procedure to determine the likelihood a customer will pay its bills
Credit Policy - --standards set to determine the amount and nature of credit to extend to
customers
Based on the Probability of Payoffs, expected profit = - --p x PV (rev - cost) - (1 - p) x PV (cost)
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