FIN 571 Week 3 DQs

Discussion Questions

Describe the cash conversion cycle and discuss its importance to working capital management.

What is a materials requirement planning (MRP) system and what are its implications in managing working capital in a manufacturing environment?

Why are interest rates on short-term loans not necessarily comparable to each other? Give three possible reasons.

How would rapidly expanding sales produce negative cash flow?

What effect does safety stock have on the carrying cost of inventory?

Optical Supply Company offers credit terms of 2/10, net 60. If Optical Supply is considering a change in its credit terms to one of those indicated, explain whether the change should increase or decrease sales. (a) 2/10, net 30, (b) net 60, (c) 3/15, net 60, (d) 2/10, net 30, 30 extra.