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  1. Suppose a firm decides to minimize its holdings of current assets, relative to sales. Which statements are true?

Answer

 

1.

The firm's expected profits will decrease.

 

2.

The firm's expected profits will increase.

 

3.

The risk of the firm's profits will decrease.

 

4.

The risk of the firm's profits will increase.

  1. A firm uses the EOQ model to detemine its optimal order quantity, but is considering adding a safety stock of 1,000 units to meet unexpected demand, or to cover demand during variations in lead time. Check all of the statements that are correct if it starts holding safety stocks.

Answer

 

a.

The firm's annual total carrying cost (TCC) will increase.

 

b.

The firm's annual total ordering cost (TOC) will decrease.

 

c.

The firm's annual total inventory cost (TIC) will increase.

  1. Match the term in the left column with the description in the right column.

credit period             length of time customers are given to pay for purchases

discount                reduction in amount owed if invoice is paid early

credit standard           required financial strength of acceptable credit customer

collection policy          procedures followed to collect past-due accounts

 

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  1. Suppose a xxxxxxx decides to xxxxxxx its holdings xxxxxxx xxxxxxx assets, xxxxxxx to sales. xxxxxxx statements are xxxxxxx border="0" xxxxxxx xxxxxxx firm's expected xxxxxxx will decrease.

     

    2.

    The xxxxxxx expected profits xxxxxxx increase.

     

    3.

    The risk xxxxxxx the firm's xxxxxxx will decrease.

     

    4.

    The xxxxxxx xxxxxxx the xxxxxxx profits will xxxxxxx value="2">A firm xxxxxxx the xxxxxxx xxxxxxx to detemine xxxxxxx optimal order xxxxxxx but is xxxxxxx adding a xxxxxxx stock of xxxxxxx units to xxxxxxx xxxxxxx demand, xxxxxxx to cover xxxxxxx during variations xxxxxxx lead xxxxxxx xxxxxxx all of xxxxxxx statements that xxxxxxx correct if xxxxxxx starts holding xxxxxxx stocks.

Answer

 

a.

The fir

 

b.

The firm's xxxxxxx total xxxxxxx xxxxxxx (TOC) will xxxxxxx firm's annual xxxxxxx inventory cost xxxxxxx will increase.

credit period        xxxxxxx of xxxxxxx xxxxxxx are given xxxxxxx pay for xxxxxxx reduction in xxxxxxx owed if xxxxxxx is paid xxxxxxx standard           required xxxxxxx xxxxxxx of xxxxxxx credit customer

collection xxxxxxx procedures followed xxxxxxx collect xxxxxxx xxxxxxx

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