Chap006 - Chapter 06 - Working Capital and the Financing...

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Unformatted text preview: Chapter 06 - Working Capital and the Financing Decision Chapter 06 Working Capital and the Financing Decision True / False Questions 1. The faster a firm's growth in sales, the more likely it is that an increasing percentage of financing will be internally generated. True False 2. Supply chain management has little impact on financial performance and is primarily a marketing and management concept. True False 3. Many companies such as McDonalds have embraced supply chain management using web- based procedures. True False 4. Working capital management is relatively unimportant for the small business. True False 5. The financial manager generally needs to devote little time to management of working capital. True False 6. Liquidating current assets are really fixed assets since they have lives greater than one year. True False 6-1 Chapter 06 - Working Capital and the Financing Decision 7. The key to current asset planning is the ability of management to forecast sales accurately and then match production schedules with the sales forecast. True False 8. One of the big benefits of implementing supply chain management, is a reduction in inventory on hand. True False 9. Permanent current assets are not similar to fixed assets because they are fully liquidated within the year. True False 10. Wal-Mart requires manufacturers to ship goods with RFID tags so that it can better track inventory and reduce the need for supply chain management. True False 11. When using level production, inventory will peak in the month where unit sales trend above the production level. True False 12. Cash, accounts receivables, and inventory all move monthly in the same direction under level production. True False 13. Level production methods smooth production schedules and utilize manpower and equipment more efficiently than seasonal production methods. True False 6-2 Chapter 06 - Working Capital and the Financing Decision 14. The use of point-of-sale terminals has made it easier for many retail store managers to manage their inventory. True False 15. The cash budget combines the cash receipts and cash payments schedules in determining cash flow. True False 16. Ideally, permanent current assets should be financed with short-term borrowings. True False 17. As a general rule, it is desirable to finance the permanent assets, including "permanent current assets", with long-term debt and equity. True False 18. Increased use of long-term financing is generally a more conservative approach to current asset financing. True False 19. A risky financial plan will use long-term financing for fixed assets, permanent current assets, and a portion of temporary current assets....
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