Winston Churchill Essays (3154 words) - Winston Churchill

Canadian Interest Groups Essay Example For Students

Canadian Interest Groups Essay Intrigue bunch portrayal in Canada distinguishes societys effect on the administering body and the strategies settled on in the authoritative setting. The piece of intrigue bunches has developed after some time and has lead to investigation of three particular ways to deal with the force the authentic gatherings have. The development and change of interests in the Canadian state are reliant upon the structure among cultural and government esteems. An intrigue bunch alludes to a gathering of people bound together to extract pressure upon the legislature to accomplish a shared objective and secure a typical advantage. The Canadian government can not manage the tremendous duty, which is appointed to it without connecting with each significant segment of national institutional structure.The cooperation gives intrigue bunches a lot of intensity since they give the association and the information required by the legislature to supervise the various requests and afterward present the issues back to the administration in an effectively reasonable procedure. Single issues or individual impact bunches are the fundamental structure squares of current weight gatherings. Each intrigue is viewed as communicating a joined purposeof people that have met up to accomplish certain destinations. These gatherings have constrained hierarchical aptitudes and come up short on the information on government to prevail in the couple of explicit issues on their goal. Single issues intrigue bunches for the most part have a liquid enrollment base, which utilize the media and extraordinary activity to get their objectives. The gatherings as a rule are battling for an adjustment in private or open strategy they discover uncalled for of low. These gatherings will in general disband when they arrive at their objectives (or yield rout). Albeit single interests bunches are not totally insufficient, their inclination towards devotion makes them not popular in the beacratic network and thus don't remain around for to long. The principle key to progress for these gat herings exists in their adequacy to interest popular conclusion. In the event that the single interests bunch is around for enough time either by succeeding or declining to surrender they for the most part unite as one with other comparative single intrigue gatherings to carry on the battle. Gatherings, for example, this are alluded to as hierarchical intrigue gatherings and as a rule contain a higher degree association than the single interests gatherings. Getting at least two gatherings together with consideration on structuarl interests can pulls in a more extensive participation base that thus offers a bigger money related help to work with. With more cash the gathering can take enlist little staff of specialists including legal counselors, open strategy specialists, and advertising staff to help meet the adjustments in the legislature. The structure and essential objectives of the association don't change after the merger it basically turns out to be progressively mind boggling . Authoritative gatherings will in general maintain a strategic distance from unreasonable conduct for the sake of the reason and the utilization of media to assemble open consideration. Rather, the gatherings utilize formal briefs to express what is on their mind to the overall population. The hierarchical gatherings are equipped in the political field yet are not as powerful as the institutional gatherings. Institutional gatherings or superorganizational bunches have a broad participation premise that takes into consideration a steady enrollment of similarly invested individuals. Everybody inside the institutional gathering doesn't participate in a similar explicit intrigue; the individuals are required to impart the data to others in the gathering to act in a typical manner. The gatherings have impressive assets to do their solid and quick targets. The assets incorporate an exceptionally prepared staff that has broad information on the administration that impacts the suitable government authorities and can discuss effectively with them. In contrast to the single interests or hierarchical gatherings, institutional intrigue bunches have the right stuff and information expected to go about as a go between, propping the political procedure up among the differing organizations. They can assess arrangement and create feelings outside of gathering discipline. Institutional gatherings individu als follow an unwritten implicit rules that precludes activity that would make the gathering negative to the higher up individuals in government. The requirement for minority portrayal in government is the base of intrigue gatherings. In an unadulterated vote based system a general public comprises of few residents who amass and control the administration face to face by a dominant part vote. The vulnerability lies in the way that there is no security for the littler and more vulnerable areas of society. The motivation behind intrigue bunches in a vote based framework is to speak to their individuals sees against the gatherings whom offer clashing perspectives, in any event, when the resistance is the greater part government. The hypothesis of pluralism depends on four key standards. The first is equivalent access to the political procedure and to the strategy making field, everybody ought to have an equivalent option to have their voice heard. Furthermore, there must be a contention between the legislature and the individuals which makes it essential for there to be distinctive intrigue bunches speaking to various thoughts. The third factor is that there must be discontinuity inside society, without which Canada would be comprised of similar individuals and there would be no requirement for minority portrayal. At last there must be lack of bias of the State, the legislature ought not show any inclination for the intrigue bunches competing for their consideration. Pluralism clarifies the more intrigue bunches there are in a political framework, the almost certain those gatherings are to kill every others qualities to ensure the state is to run for a tip top not many. Rather, the enormous number of intrigu e bunches in a framework makes a general public for the benefit of everyone everything being equal. Consider the hugeness of the Hamlet's phantom to the play EssayAlthough Canada exhibits some level of pluralism, Canadians are a long way from an ideal pluralistic culture. Major pluralism, as talked about prior, doesn't exist. It is ridiculous to believe that each intrigue bunch has similar assets be it monetary, levels of instruction, or the force the individuals hold. On the off chance that all intrigue bunches don't stand equivalent, at that point there will be portions of society (minorities, poor people, and so on.) which are underrepresented. At that point just the tip top will make the interest for change in the public eye yet it will be change just for a chosen few and not for the general population. Likewise, there is proof that legislatures do support a few gatherings over others and preference makes governments hear the need of the favored gathering over another. The hypothesis of cooporatism endeavors, similar to pluralism, to depict the real connection between intrigue gatherings and government. This relationship is depicted as agreeable between some intrigue gatherings and government with the objective to give soundness in the turn of events and execution of arrangements. In principle, the administration of a fundamentalist state basically powerfully controls state corporatism. Neither pluralism nor corporatism appears to fit with the Canadian framework. A hypothesis of corporate pluralism fits better in with the arrangement of government. Corporate pluralism permits the legislature to allow the ability to certain intrigue gatherings to talk and haggle for their segment. Furthermore, it includes the mediation of government in the economy and society to accomplish certain objectives or approaches. Organizations in Canada are the major political supporter for ideological groups. In 1999, business and business associations contributed over 12.7 million dollars to the various gatherings in Canada and it isn't too suprising the top beneficiary of the business universes liberality was the Liberals getting more and 6,000,000 over what some other gathering got. Government officials tune in and agree to those whom cover the tabs. Not all business requests will be suited as a result of enormous battle commitment, particularly if there is an irreconcilable circumstanc e between two contributing business gatherings. . Business concerns are managed at the most significant levels of government and have across the country importance. Organizations are sought by equalities to guarantee the two gatherings get what they need. Gatherings will ensure favors or business contracts once chose for office, is a commitment is made. Organizations purchase access to the individuals in power. The enormous financial blessings guarantee the administration will a least tune in to the issues of the business network. The administration will as a rule award business demands on the off chance that they are sensible and inside the legislatures power. On the off chance that business feel unequivocally about a particular desision in regards to a specific issue, singular business will campaign together and structure an alliance. In November of 1981 a business alliance was shaped in dissent of the MacEachen spending plan. The shock of the business network made the official a financial proclamation, specifying another spending seven months after the primary financial plan was discharged. Enormous business gets their direction. At the point when specialized issues are included government for the most part follows the inform with respect to organizations in light of the fact that the goverment needs a clarification on the effect new innovation has on society and whom preferable to reply over those whom structured it. In spite of the fact that globalization influences Canadians, the impacts are negligible contrasted with the remainder of the world. Canada is a country of outsiders, with starting points arriving at all sides of the globe. The character of the nation speaks to people groups with differing interests, objectives, and assets. Globalization changes the association of intrigue gatherings yet the impacts are immeasureable on account of the nation is one of the most worldwide of countries and will probably manage worldwide issues in the bounds of go vernment arrangement. Intrigue bunches in Canada have been subject to the three degrees of examination that different interests gatherings. Authoritative intrigue bunches have been increasing incredible energy in Canadian legislative issues which conditions polit

Selecting 50 Argumentative Essay Topics

Selecting 50 Argumentative Essay TopicsEach year I give a lecture at a college about how to select fifty argumentative essay topics. Each year, I receive a different mix of topics. What I have noticed this year is that not only do I get a more diverse range of topics from my students, but it also seems like they are more interested in talking about topics that really interest them.First off, I want to be clear that there is no single way to choose your essay topics. You should go with the topic that will best serve your learning needs. For instance, if you are an English major who wants to write an essay on Canadian literature, then your topic could be Canadian Literature.However, if you want to write an essay on Facebook or travel blogs, then your actual topic may be something else entirely. Your goal here is to choose topics that will make you a better writer.The next step is to pick a topic. You can do this by reading one or two books and doing some research on the topic. The more you know about the topic, the easier it will be to write a well-written essay.Next, write a draft on your topic. Of course, this will depend on the topics you already selected but using your topic as a guide, you should edit it as you go along to make sure you don't leave out important facts.Once you have made a few drafts and are happy with the first draft, it's time to look at the topic again. Remember that there is no right or wrong way to read a book, but if you can't get something out of the book, your piece won't have much value. So, consider rereading your topic several times to ensure you are getting the point across.Once you are happy with your draft, you can submit it to a professional editor for editing. They will make several changes based on their own experience and judgment. However, if you think your topic is too broad, or you need to narrow it down even more, then this is the perfect time to hire an editor.Finally, take into account how well you are doing with the e ssay. If you feel that you are not up to par, then rework your topic and test it until you are comfortable.

The Death Penalty Is It Ever Justified - 1111 Words

American prisons today are filled to their capacities, yet crime here in America seems to have increased. I am speaking of one of the cruelest forms of crime that must be eradicated, which is murder. It seems as though a life sentence does not impose fear into modern day criminals, seeing that serious crimes are being committed more often. The death penalty is something that is needed here in the United States to help lower these ongoing vicious crime rates. In the essay â€Å"The Death Penalty: Is It Ever Justified?† Written by Edward I. Koch, this exact issue is discussed. Koch believes capital punishment in the form of the death penalty may help make these criminals to understand morality, or right from wrong. He states, â€Å"Life is indeed precious, and I believe the death penalty helps to affirm that fact† (483). If they were aware of the penalty, criminals may have, â€Å"Shown moral awareness before their victims die, and not after† (484). Through persuas ive techniques Koch will support his argument in favor of the death penalty. When arguing about an intense topic such as death penalty, not only is having a knowledgeable background needed, but emotions of both parties must be taken into play. Koch builds up his credibility by mentioning his extensive twenty-two year background in public service. As stated, he has been a â€Å"district leader, councilman, congressman, and mayor† (484). This shows Koch has had support from his community to have been elected mayor, and show that theyShow MoreRelatedIs The Death Penalty Ever Justified?1099 Words   |  5 PagesLyndze Curry Professor Jennifer Arceo English 1301.1CY 09, June 2015 Is The Death Penalty Ever Justified? In the American society many citizens argue daily, is the death penalty justified? The United States is sharply divided, and equally strong among both supporters and protesters of the death penalty. Arguing against capital punishment, many believe The death penalty is the ultimate denial of human rights (White).† Some simply believe it to be premeditated and cold-blooded killing of a humanRead MoreThe Death Penalty Is It Ever Justified?958 Words   |  4 Pageswere written about the death penalty. Throughout this essay I will be using examples from multiple sources. Marie Cartier â€Å"Right to Life vs Right to A Life†, Edward Koch â€Å"The Death Penalty: Is it Ever Justified?†, David Bruck â€Å"The Death Penalty† which is a direct response to Koch, and lastly Zachary Shemtob and David Lat â€Å" Should Executions Be Televised†. It should also be stated that when talking about the value of life, this author is referring to the criminal, on death row for murder. As insensitiveRead MoreCan The Death Penalty Ever Be Justified?1828 Words   |  8 PagesCan the death penalty ever be justified? The legitimacy of the use of capital punishment has been tarnished by its widespread misuse , which has clouded our judgment regarding the justifiability of the death penalty as a punitive measure. However, the problems with capital punishment, such as the â€Å"potential error, irreversibility, arbitrariness and racial skew , are not a basis for its abolition, as the world of homicide suffer from these problems more acutely. To tackle this question, one mustRead MoreThe Death Penalty: Can It Ever Be Justified? Essay1426 Words   |  6 Pages â€Å"The Death Penalty: Can It Ever Be Justified?† Edward I. Koch uses his essay â€Å"The Death Penalty: Can It Ever Be Justified?† to defend capital punishment. He believes that justice for murderous crimes is essential for the success of the nation. The possibility of error is of no concern to Koch and if would-be murderers can be deterred from committing these heinous crimes, he feels the value of human life will be boosted and murder rates will consequently plummet (475-479). Koch makes a valiantRead MoreCapital Punishment Essay example710 Words   |  3 PagesCapital Punishment Lets keep society safe and give murderers what they deserve - the death penalty. In this essay I will hope to set out both sides of the argument, for and against Capital Punishment. The advantages and the disadvantages will be considered in conjunction with Christian teachings and belief. The Christian teachings, Old Testament and New Testament will also be compared with human reactions to the subject. From my research and analysis inRead MoreDealth Penalty Is Not a Solution Essay1003 Words   |  5 PagesIs the death penalty a good solution to crime? The death penalty is not a good solution to crime. The ultimate purpose of the justice system is to control crime by punishing criminals and protect people by imprisoning them. Compared to the death penalty, life imprisonment not only achieves the same goals but also in many ways it can be more effective than capital punishment. In the Vincent Brothers’ case of 2004, Brothers murdered five of his family members- his wife, children, and mother in lawRead MoreCapital Punishment : A Prosperous And Amazing Journey For The Development And Advancements Of The Human Race1656 Words   |  7 Pagesand Han dynasties all demonstrated the need for a death penalty to expunge the evil from their land. Established in the Roman 12 Tablets, contested as one of the greatest pieces of law from its time, validated the death penalty on the concept that a nation needed to be pure and as humanely guided as possible. The concept of capital punishment, although highly challenged, has a chronicle of evidence that supports the requirement of the death penalty. Capital punishment is necessary based on the factRead MoreThe Death Penalty Is Not Morally Permissible?1231 Words   |  5 Pagescrime has been met with several different styles of execution. In 1976, the United States government reinstalled the death penalty four short years after having banned it claiming that it violated the Constitution s ban on cruel and unusual punishment (MacKinnon, Ethics 289). Since 1976, the morality of execution as just punishment has been a highly discussed topic. The death penalty is not morally permissible because dissolving one s basic human right to life is wrong. In the United States,Read MoreJustification in The Old and New Testaments Essays1681 Words   |  7 Pages When a man is justified before God, he is declared not guilty with reference to the sins he has committed against God. Amazingly, Gods not guilty verdict does not relate to just one crime, but to every sin the justified man has ever committed or will commit. Paul declares that we have no penalty to pay for sin, which includes past, present or future sins that we may commit. Those who have been justified by faith, â€Å"There is therefore now no condemnation for those who are in ChristRead MoreBanning the Death Penalty1620 Words   |  6 PagesShould the death penalty be banned internationally as a type of punishment? This form of punishment has been quite a controversial issue worldwide for quite a few years. The death penalty for hundreds of thousands of years has been a punishment for criminals throughout the world; in the past ranging from what we would n ow consider small crimes to huge ones, to the present where most if not all those punished with death penalty are for fairly large crimes. Actual laws involving death penalty is known

The Declaration Of Independence Argument And Persuasion...

The Declaration of Independence was written for the purpose of separating the American colonies from the British Empire. In context of history, The Declaration was the first step into a modern representative democracy. In addition, the makers of the declaration, primarily Thomas Jefferson, constructed an argument to state the problems they had with Britain and tell how the new American government was going to deal with the problems. The argument Jefferson constructed was one made with all the wrong evidence; however, he built the argument in such a way to rally a people for war. The Declaration of Independence is a well-written example of argument and persuasion with its use of structure as a whole, use of specific fallacies, and use of appeals. Foremost, when looking at the Declaration there needs to be an understanding of who the audience is. The most prominent person who would be reading this document would be the king himself, King George III. When looking at the Declaration, King George would primarily be looking at the argument Jefferson put forth. He also would be looking at the attacks and accusations being set against him. The purpose of the Declaration, with the King for an audience, is to separate all legal and moral ties. In the newly formed American government, Congress would be looking at what they were setting themselves up for and placing forth the foundation of their government. Congress’s purpose for writing the Declaration was to start a government andShow MoreRelatedThe Declaration, Facts And Emotions909 Words   |  4 PagesThe Declaration, Facts and Emotions for Independence The 4th of July, the United States of America’s very-own birthday, a day of celebration of its citizens God-given rights and liberties, and its independence from the crown of Great Britain. If America was â€Å"born† on the 4th of July in the year 1776, then The Declaration of Independence could be considered its very own birth certificate. The Declaration of Independence, as time has proven, is one of the most successful arguments ever made byRead More Fallacious Arguments In the Declaration of Independence Essay567 Words   |  3 Pages Fallacious Arguments in the Declaration of Independence nbsp;nbsp;nbsp;nbsp;nbsp;The Declaration of Independence is among the most profoundly interpreted and fiercely discussed documents in modern history. Most likely because of its rhetorical style and numerous fallacious arguments that are found. The colonists’ use of persuasion to influence by using repetition to achieve their means. The Declaration of Independence is what 56 colonists saw as a logical course of action. What you mustRead MoreMartin Luther King Jr s Letter Of Birmingham Jail903 Words   |  4 PagesBirmingham Jail,† and Thomas Jefferson in the Declaration of Independence both advocate the claim for freedom. Both of these historical figures make this apparent by arguing for the protest against tradition, a change across unjust laws, although they differ between the kinds of change to be enforced. Martin Luther King Junior’s a letter from a Birmingham Jail was him expressing his motivation for the protest against tradition. King’s arguments are founded on emotions and the appeal to cultureRead MoreThe Declaration Of Independence By Thomas Jefferson1420 Words   |  6 PagesMy initial thought of writing a paper for The Declaration of Independence, written by Thomas Jefferson, was one of confusion and nervousness. I had no idea how I could write a paper on the documents structural elements and not focus on its history; however, once I did some research it became clear to me how I would write this paper. The Declaration of Independence is an influential document with argumentative writing techniques that appeal to the reader’s emotions. This document also contains persuasiveRead MoreThe Declaration Of Independence By Thomas Jefferson1455 Words   |  6 PagesThe Declaration of Independence is viewed by just about every patriotic American citizen as one of the most ideologically appropriate documents encapsulating the beliefs for which the United States of America stands. Written in 1776, it encompasses the themes of freedom for every man in the world, a concept and belief that is still the central idea and goal in this country well over 200 years later. Much credit is due to those who authored such an inspirational and monumental document. The most famousRead MoreEthos, Pathos, and Logos: Black Abolitionist Arguments Against Slavery1420 Words   |  6 Pageshaving witnessed its horrors first-hand, these three black reformers publicly took a stand against the atrocity of enslaving fellow human beings. They argued for their rights as men and women. However, they each went about their arguments using different modes of persuasion. While the main message of each abolitionist was individual freedom and they were very impassioned about this cause, Sojourner Truth mainly used ethos and Biblical references in her â€Å"Ain’t I a Wom an?† speech to appeal to her audienceRead More All Men Created Equal Essay1091 Words   |  5 Pagesthe American people. He battled against an equally strong constituency – the slave owners and their presidential candidate, Judge Douglas. Abrahams grounds for the abolition of slavery were based on the words that were scripted in the Declaration of Independence and the meaning of those words as they related to American citizens and the celebration of the 4th of July. Many Americans argued that the Negroes were not entitled to the same rights because they were not legally citizens of the UnitedRead MoreDr. King s Speech986 Words   |  4 Pagespersuaded people in opposition to civil rights by using different methods of rhetorical appeal. Dr. King s speech was so interesting, because of the combination of rhetorical appeal styles he uses, such as ethos, logos, and pathos. A method of persuasion Dr. King uses in his speech to establish credibility and gain the trust of his audience, is known as ethos. With the subject of his speech being Civil Rights and equality, Dr. King needed to establish his credibility as a Civil Rights leader, andRead MoreCarrie Buck1501 Words   |  7 Pagesmetaphor from the ballad â€Å"Barbara Allen† will be talked about. At the end this paper will also examine and evaluate whether Gould succeeded or not in his argument or persuasion essay Gould was a world renowned historian of science. (Shermer) This is why one believes that he uses metaphors that happened in history. He wanted to prove his arguments by relating to what has already happened in the past which is unique for a writer to do. The first metaphor was a comparison to Judeo-Christian and Greco-RomanRead More2.05A AP English Declaration Questions Essay examples742 Words   |  3 Pagesï » ¿1. In the first paragraph of the declaration, Jefferson states the reason for the writing of this document. What reason does he give? a. He says â€Å"a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.† He was saying that it is morally right to explain why they were separating from the crown. 2. Where does a government acquire its power, according to the declaration? a. The government gets its power from the people of the Unites

Forensic Medicine ad Toxicology †Free Samples to Students

Question: Discuss about the Forensic Medicine ad Toxicology. Answer: Introduction: Forensic autopsy was carried out to determine the manner and cause of death. Forensic autopsy is always done when the cause of death is suspected to have been criminal (Vij, 2014). The now deceased had a disagreement with the husband and uncertainly died, therefore the forensic autopsy. Clinical autopsy could have not been done as the cause of death was evident. The autopsy indicated a well inflated lungs and moderate agonal congestion which supports that GW had started CPR. The claims by GW would have been supported by evident changes in the ribs of the deceased. The stomach of the deceased was found to be empty since the victim had not taken any solid closer to the point of death. The diseased only took lots of alcohol after breakfast which is absorbed directly into the body system. The liver was expected to show signs of focal lesions in addition to the paleness and bile stains. The liver should have also been lobular dues to malfunction dues to the overdose and form a mottling pattern as well as grossly necrotic. There was no fatty change during the autopsy as well as lack of fibrosis indicates abnormality. The paleness of the liver and was an abnormal histological evidence. Yes these would have been as a result of the care of the patient in the last two days prior to death (Kharoshah et.al 2011). The normal historical depends on various factors including patience care thus the condition of the patient in the last two days caused the abnormality. According to the police report, TA had relationship problems with the husband. The deceased financial problems as well and had been referred to a doctor as a result of depression. Based on these the patient had the motive and means to commit suicide. The manner of death in this case was natural as no any other substance was found within the diseased body during the autopsy. The deceased died a natural death as a result of too much consumption of alcohol and which affected the body system leading to death. Alcohol poisoning, based on the evidence of the autopsy report the deceased died of alcohol poisoning which is a result too much alcohol in the blood stream (Byard Payne, 2015). The deceased had an empty stomach as all the consumed alcohol had moved to the blood stream affecting brain activities thus low breathing rate, reduce heart rate leading to shuttering of all system of the body. There were other test such alcohol poisoning tests would have been done to check if the deceased could have been suffering from the effect of excess alcohol present in the blood stream. This would have been done immediately the deceased was brought into the hospital as this could have led to various mechanisms to eliminate alcohol within blood stream even though the patient would have experienced brain effects in case of survival. The deceased died at the age of 27 year, at this age the cause of death is mostly suicide and accidental poisoning. The deceased is likely to have died of alcohol misuse as well as relationship problems. The death therefore consistent to the data as indicated in epidemiology module two. References Byard, R., Payne-James, J. (2015). Encyclopedia of forensic and legal medicine. Academic Press. Kharoshah, M. A. A., Zaki, M. K., Galeb, S. S., Moulana, A. A. R., Elsebaay, E. A. (2011). Origin and development of forensic medicine in Egypt. Journal of forensic and legal medicine, 18(1), 10-13. Vij, K. (2014). Textbook of Forensic Medicine Toxicology: Principles Practice-e-book. Elsevier Health Sciences.

Managerial Finance Essay Example

Managerial Finance Paper CHAPTER 15 MANAGING CURRENT ASSETS (Difficulty: E = Easy, M = Medium, and T = Tough) Multiple Choice: Conceptual Easy: Working capitalAnswer: c Diff: E [i]. Other things held constant, which of the following will cause an increase in working capital? a. Cash is used to buy marketable securities. b. A cash dividend is declared and paid. c. Merchandise is sold at a profit, but the sale is on credit. d. Long-term bonds are retired with the proceeds of a preferred stock issue. e. Missing inventory is written off against retained earnings. Working capitalAnswer: d Diff: E N [ii]. Which of the following statements is most correct? a. The current ratio is calculated as net working capital divided by current liabilities. b. Gross working capital represents current assets used in operations. c. Net working capital is defined as current assets minus current liabilities. d. Statements b and c are correct. e. Statements a, b, and c are correct. Cash conversion cycleAnswer: b Diff: E [iii]. Helena Furnishings wants to sharply reduce its cash conversion cycle. Which of the following steps would reduce its cash conversion cycle? a. The company increases its average inventory without increasing its sales. . The company reduces its DSO. c. The company starts paying its bills sooner, which reduces its average accounts payable without reducing its sales. d. Statements a and b are correct. e. All of the statements above are correct. Cash budgetAnswer: e Diff: E [iv]. Which of the following is typically part of the cash budget? a. Payments lag. b. Payment for plant construct ion. c. Cumulative cash. d. Statements a and c are correct. e. All of the above statements are correct. Cash budgetAnswer: a Diff: E [v]. Which of the following statements concerning the cash budget is correct? a. We will write a custom essay sample on Managerial Finance specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Managerial Finance specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Managerial Finance specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Depreciation expense is not explicitly included, but depreciation effects are implicitly included in estimated tax payments. b. Cash budgets do not include financial expenses such as interest and dividend payments. c. Cash budgets do not include cash inflows from long-term sources such as bond issues. d. Statements a and b are correct. e. Statements a and c are correct. Cash budgetAnswer: d Diff: E [vi]. Which of the following items should a company explicitly include in its monthly cash budget? a. Its monthly depreciation expense. b. Its cash proceeds from selling one of its divisions. c. Interest paid on its bank loans. d. Statements b and c are correct. e. All of the statements above are correct. Cash managementAnswer: a Diff: E [vii]. Which of the following statements is most correct? a. A cash management system that minimizes collections float and maximizes disbursement float is better than one with higher collections float and lower disbursement float. b. A cash management system that maximizes collections float and minimizes disbursement float is better than one with lower collections float and higher disbursement float. c. The use of a lockbox is designed to minimize cash theft losses. If the cost of the lockbox is less than theft losses saved, then the lockbox should be installed. d. Other things held constant, a firm will need a smaller line of credit if it can arrange to pay its bills by the 5th of each month than if its bills come due uniformly during the month. e. None of the statements above is correct. Cash managementAnswer: d Diff: E [viii]. Which of the following statements about current asset management is most correct? a. A positive net float means that a company has more cash available for its use than the amount shown in the company’s books. b. Use of a lockbox reduces the possibility that petty cash will be lost. c. Depreciation has an impact on the cash budget. d. Statements a and c are correct. e. All of the statements above are correct. Cash managementAnswer: e Diff: E [ix]. Which of the following statements is most correct? a. A good cash management system would minimize disbursement float and maximize collections float. b. If a firm begins to use a well-designed lockbox system, this will reduce its customers’ net float. c. In the early 1980s, the prime interest rate hit a high of 21 percent. In 2000 the prime rate was considerably lower. That sharp interest rate decline has increased firms’ concerns about the efficiency of their cash management programs. d. If a firm can get its customers to permit it to pay by wire transfers rather than having to write checks, this will increase its net float and thus reduce its required cash balances. e. A firm that has such an efficient cash management system that it has positive net float can have a negative checkbook balance at most times and still not have its checks bounce. LockboxAnswer: d Diff: E [x]. A lockbox plan is a. A method for safe-keeping of marketable securities. b. Used to identify inventory safety stocks. c. A system for slowing down the collection of checks written by a firm. d. A system for speeding up a firm’s collections of checks received. e. Not described by any of the statements above. Marketable securitiesAnswer: a Diff: E [xi]. Which of the following is not a situation that might lead a firm to hold marketable securities? a. The firm has purchased a fixed asset that will require a large write-off of depreciable expense. b. The firm must meet a known financial commitment, such as financing an ongoing construction project. c. The firm must finance seasonal operations. . The firm has just sold long-term securities and has not yet invested the proceeds in earning assets. e. None of the statements above is correct. (All of the situations might lead the firm to hold marketable securities. ) Monitoring receivablesAnswer: b Diff: E [xii]. Analyzing days sales outstanding (DSO) and the aging schedule are two common methods for monitorin g receivables. However, they can provide erroneous signals to credit managers when a. Customers’ payments patterns are changing. b. Sales fluctuate seasonally. c. Some customers take the discount and others do not. d. Sales are relatively constant, either seasonally or cyclically. e. None of the statements above is correct. Credit policyAnswer: e Diff: E [xiii]. Which of the following is not commonly regarded as being a credit policy variable? a. Credit period. b. Collection policy. c. Credit standards. d. Cash discounts. e. All of the statements above are credit policy variables. Credit policyAnswer: d Diff: E [xiv]. If easing a firm’s credit policy lengthens the collection period and results in a worsening of the aging schedule, then why do firms take such actions? a. It normally stimulates sales. b. To meet competitive pressures. c. To increase the firm’s deferral period for payables. d. Statements a and b are correct. e. All of the statements above are correct. Inventory managementAnswer: d Diff: E [xv]. In the text, the â€Å"red-line method† refers to a. The policy of drawing a red line around certain neighborhoods on a map and then refusing to sell on credit to people who live within those areas. b. Restrictions imposed by companies that insure credit risks. c. The use in Dun Bradstreet’s reports of a red line to show the maximum amount of credit that should be extended to a given customer; ompanies using this limit when they screen customers’ orders are said to be using the â€Å"red-line method. † d. A method of controlling inventories by drawing a red line on the inside of a bin. e. A method of controlling receivables by drawing a red line on invoices of companies that are expected to pay late. Inventory managementAnswer: e Diff: E [xvi ]. Which of the following might be attributed to efficient inventory management? a. High inventory turnover ratio. b. Low incidence of production schedule disruptions. c. High total assets turnover. d. Statements a and c are correct. e. All of the statements above are correct. Miscellaneous working capital conceptsAnswer: e Diff: E N [xvii]. Which of the following statements is most correct? a. Working capital management involves both setting working capital policy and carrying out that policy in day-to-day operations. b. The aging schedule is the cycle in which a firm purchases inventory, sells goods on credit, and then collects accounts receivable. c. The best and most comprehensive picture of a firm’s liquidity position is shown by its cash budget, which forecasts cash inflows and outflows. d. Statements a, b, and c are correct. e. Statements a and c are correct. Medium: Cash conversion cycleAnswer: d Diff: M [xviii]. Ignoring cost and other effects on the firm, which of the following measures would tend to reduce the cash conversion cycle? a. Maintain the level of receivables as sales decrease. b. Buy more raw materials to take advantage of price breaks. c. Take discounts when offered. d. Forgo discounts that are currently being taken. e. Offer a longer deferral period to customers. Cash conversion cycleAnswer: d Diff: M [xix]. Which of the following actions are likely to reduce the length of a company’s cash conversion cycle? a. Adopting a new inventory system that reduces the inventory conversion period. b. Reducing the average days sales outstanding (DSO) on its accounts receivable. c. Reducing the amount of time the company takes to pay its suppliers. d. Statements a and b are correct. e. All of the statements above are correct. Cash balancesAnswer: c Diff: M [xx]. Which of the following statements is most correct? a. The cash balances of most firms consist of transactions, compensating, precautionary, and speculative balances. The total desired cash balance can be determined by calculating the amount needed for each purpose and then summing them together. . The easier a firm’s access to borrowed funds the higher its precautionary balances will be, in order to protect against sudden increases in interest rates. c. For some firms, holding highly liquid marketable securities is a substitute for holding cash because the marketable securities accomplish the same objective as cash. d. Firms today are mo re likely to rely on cash than on reserve borrowing power or marketable securities for speculative purposes because of the need to move quickly. e. None of the statements above is correct. Cash budgetAnswer: e Diff: M [xxi]. Which of the following statements is most correct? . Shorter-term cash budgets, in general, are used primarily for planning purposes, while longer-term budgets are used for actual cash control. b. The cash budget and the capital budget are planned separately and although they are both important to the firm, they are independent of each other. c. Since depreciation is a non-cash charge, it does not appear on nor have an effect on the cash budget. d. The target cash balance is set optimally such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it is changed to reflect long-term changes in the firm’s operations. . The typical actual cash budget will reflect interest on loans and income from investment of surplus cash. These numbers are expected values and actual results might turn out different. Cash managementAnswer: e Diff: M [xxii]. A lockbox plan is most beneficial to firms that a. Send payables over a wide geographic area. b. Have widely disbursed manufacturing facilities. c. Have a large marketable securities account to protect. d. Hold inventories at many different sites. e. Make collections over a wide geographic area. Marketable securities portfolioAnswer: d Diff: M [xxiii]. Which of the following statement completions is most correct? If the yield curve is upward sloping, then a firm’s marketable securities portfolio, assumed to be held for liquidity purposes, should be a. Weighted toward long-term securities because they pay higher rates. b. Weighted toward short-term securities because they pay higher rates. c. Weighted toward U. S. Treasury securities to avoid interest rate risk. d. Weighted toward short-term securities to avoid interest rate risk. e. Balanced between long- and short-term securities to minimize the effects of either an upward or a downward trend in interest rates. FloatAnswer: a Diff: M [xxiv]. Which of the following statements is most correct? a. Poor synchronization of cash flows that results in high cash management costs can be partially offset by increasing disbursement float and decreasing collections float. b. The size of a firm’s net float is primarily a function of its natural cash flow synchronization and how it clears its checks. c. Lockbox systems are used mainly for security purposes as well as to decrease the firm’s net float. d. If a firm can speed up its collections and slow down its disbursements, it will be able to reduce its net float. . A firm practicing good cash management and making use of positive net float will bring its check book balance as close to zero as possible, but must never generate a negative book balance. Compensating balancesAnswer: c Diff: M [xxv]. Which of the following statements is most correct? a. Compensating balance requirements apply only to businesses, not to individuals. b. Compensat ing balances are essentially costless to most firms, because those firms would normally have such funds on hand to meet transactions needs anyway. c. If the required compensating balance is larger than the transactions balance the firm would ordinarily hold, then the effective cost of any loan requiring such a balance is increased. d. Banks are prohibited from earning interest on the funds they force businesses to keep as compensating balances. e. None of the statements above is correct. Receivables managementAnswer: b Diff: M [xxvi]. Which of the following statements is most correct? a. A firm that makes 90 percent of its sales on credit and 10 percent for cash is growing at a rate of 10 percent annually. If the firm maintains stable growth it will also be able to maintain its accounts receivable at its current level, since the 10 percent cash sales can be used to manage the 10 percent growth rate. b. In managing a firm’s accounts receivable it is possible to increase credit sales per day yet still keep accounts receivable fairly steady if the firm can shorten the length of its collection period. c. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm’s receivables management needs to be reviewed and improved. d. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio should also have a high payables-to-sales ratio. e. None of the statements above is correct. Credit policy and seasonal datingAnswer: b Diff: M [xxvii]. Which of the following statements is most correct? a. If credit sales as a percentage of a firm’s total sales increases, and the volume of credit sales also increases, then the firm’s accounts receivable will automatically increase. b. It is possible for a firm to overstate profits by offering very lenient credit terms that encourage additional sales to financially â€Å"weak† firms. A major disadvantage of such a policy is that it is likely to increase uncollectible accounts. c. A firm with excess production capacity and relatively low variable costs would not be inclined to extend more liberal credit terms to its customers than a firm with similar costs that is operating close to capacity. d. Firms use seasonal dating primarily to decrease their DSO. e. Seasonal dating with terms 2/15, net 30 days, with April 1 dating, means that if the original sale took place on February 1st, the customer can take the discount up until March 15th, but must pay the net invoice amount by April 1st. DSO and aging scheduleAnswer: c Diff: M [xxviii]. Which of the following statements is most correct? a. If a firm’s volume of credit sales declines then its DSO will also decline. b. If a firm changes its credit terms from 1/20, net 40 days, to 2/10, net 60 days, the impact on sales can’t be determined because the increase in the discount is offset by the longer net terms, which tends to reduce sales. c. The DSO of a firm with seasonal sales can vary. While the sales per day figure is usually based on the total annual sales, the accounts receivable balance will be high or low depending on the season. d. An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit. e. Aging schedules can be constructed from the summary data provided in the firm’s financial statements. Days sales outstanding (DSO)Answer: c Diff: M [xxix]. Which of the following statements is most correct? a. Other things held constant, the higher a firm’s days sales outstanding (DSO), the better its credit department. b. If a firm that sells on terms of net 30 changes its policy and begins offering all customers terms of 2/10, net 30, and if no change in sales volume occurs, then the firm’s DSO will probably increase. . If a firm sells on terms of 2/10, net 30, and its DSO is 30 days, then its aging schedule would probably show some past due accounts. d. Statements a and c are correct. e. None of the statements above is correct. Working capital policyAnswer: d Diff: M [xxx]. Which of the following statements is incorrect about working capital policy? a. A company may hold a relatively large amount of cash if it anticipates uncertain sales levels in the coming year. b. Credit policy has an impact on working capital since it has the potential to influence sales levels and the speed with which cash is collected. c. The cash budget is useful in determining future financing needs. d. Holding minimal levels of inventory can reduce inventory carrying costs and cannot lead to any adverse effects on profitability. e. Managing working capital levels is important to the financial staff since it influences financing decisions and overall profitability of the firm. Miscellaneous conceptsAnswer: e Diff: M [xxxi]. Which of the following statements is most correct? a. Depreciation is included in the estimate of cash flows (Cash flow = Net income + Depreciation), so depreciation is set forth on a separate line in the cash budget. . If cash inflows and cash outflows occur on a regular basis, such as the situation where inflows from collections occur in equal amounts each day and most payments are made regularly on the 10th of each month, then it is not necessary to use a daily cash budget. A cash budget prepared at the end of the month will suffice. c. Lockboxes are more important for fast food retailers such as McDonald’s, which deal primarily with cash, than for manufacturers such as Xerox, which are generally paid by check. d. Statements b and c are correct. e. None of the statements above is correct. Multiple Choice: Problems Easy: Sales collectionsAnswer: d Diff: E [xxxii]. The Danser Company expects to have sales of $30,000 in January, $33,000 in February, and $38,000 in March. If 20 percent of sales are for cash, 40 percent are credit sales paid in the month following the sale, and 40 percent are credit sales paid 2 months following the sale, what are the cash receipts from sales in March? a. $55,000 b. $47,400 c. $38,000 d. $32,800 e. $30,000 FloatAnswer: d Diff: E [xxxiii]. Jumpdisk Company writes checks averaging $15,000 a day, and it takes five days for these checks to clear. The firm also receives checks in the amount of $17,000 per day, but the firm loses three days while its receipts are being deposited and cleared. What is the firm’s net float in dollars? a. $126,000 b. $ 75,000 c. $ 32,000 d. $ 24,000 e. $ 16,000 Accounts receivable balanceAnswer: a Diff: E R [xxxiv]. If Hot Tubs Inc. had sales of $2,027,773 per year (all credit) and its days sales outstanding was equal to 35 days, what was its average amount of accounts receivable outstanding? (Assume a 365-day year. ) a. $194,444 b. $ 57,143 c. $ 5,556 d. $ 97,222 e. $212,541 Inventory conversion periodAnswer: b Diff: E N xxxv]. A firm has $5,000,000 of inventory on average and annual sales of $30,000,000. Assume there are 365 days per year. What is the firm’s inventory conversion period? a. 30. 25 days b. 60. 83 days c. 45. 00 days d. 72. 44 days e. 55. 25 days Payables deferral periodAnswer: c Diff: E N [xxxvi]. Ammer Products has an average accounts payable balance of $850,000 and its annual cost of goods sold is $8,750,000. Assume there are 365 days per year. What is Ammer’s payables deferral period? a. 25. 50 days b. 30. 50 days c. 35. 46 days d. 42. 33 days e. 50. 00 days Cash conversion cycleAnswer: d Diff: E xxxvii]. Spartan Sporting Goods has $5 million in inventory and $2 million in accounts receivable. Its average daily sales are $100,000. The company’s payables deferral period (accounts payable divided by daily purchases) is 30 days. What is the length of the company’s cash conversion cycle? a. 100 days b. 60 days c. 50 days d. 40 days e. 33 days Cash conversion cycleAnswer: a Diff: E R [xxxviii]. For the Cook County Company, the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assuming a 365-day year, what is the length of the firm’s cash conversion cycle? a. 87 days b. 90 days c. 65 days d. 48 days e. 66 days Inventory turnover ratio and DSOAnswer: a Diff: E N [xxxix]. Bowa Construction’s days sales outstanding is 50 days (on a 365-day basis). The company’s accounts receivable equal $100 million and its balance sheet shows inventory equal to $125 million. What is the company’s inventory turnover ratio? a. 5. 84 b. 4. 25 c. 3. 33 d. 2. 75 e. 7. 25 Medium: Cash budgetAnswer: c Diff: M [xl]. Chadmark Corporation’s budgeted monthly sales are $3,000. Forty percent of its customers pay in the first month and take the 2 percent discount. The remaining 60 percent pay in the month following the sale and don’t receive a discount. Chadmark’s bad debts are very small and are excluded from this analysis. Purchases for next month’s sales are constant each month at $1,500. Other payments for wages, rent, and taxes are constant at $700 per month. Construct a single month’s cash budget with the information given. What is the average cash gain or (loss) during a typical month for Chadmark Corporation? a. $2,600 b. $ 800 c. $ 776 d. $ 740 e. $ 728 ROE and working capital policyAnswer: c Diff: M xli]. Jarrett Enterprises is considering whether to pursue a restricted or relaxed current asset investment policy. The firm’s annual sales are $400,000; its fixed assets are $100,000; debt and equity are each 50 percent of total assets. EBIT is $36,000, the interest rate on the firm’s debt is 10 percent, and th e firm’s tax rate is 40 percent. With a restricted policy, current assets will be 15 percent of sales. Under a relaxed policy, current assets will be 25 percent of sales. What is the difference in the projected ROEs between the restricted and relaxed policies? a. 0. 0% b. 6. 2% c. 5. 4% d. 1. 6% e. 3. % Inventory conversion periodAnswer: d Diff: M R [xlii]. On average, a firm sells $2,000,000 in merchandise a month. It keeps inventory equal to one-half of its monthly sales on hand at all times. If the firm analyzes its accounts using a 365-day year, what is the firm’s inventory conversion period? a. 365. 0 days b. 182. 5 days c. 30. 3 days d. 15. 2 days e. 10. 5 days Cash conversion cycleAnswer: e Diff: M N [xliii]. Biondi Manufacturing Company (BMC) has an average accounts receivable balance of $1,250,000, an average inventory balance of $1,750,000, and an average accounts payable balance of $800,000. Its annual sales are $12,000,000 and its cost of goods sold represents 80 percent of annual sales. Assume there are 365 days in a year. What is BMC’s cash conversion cycle? a. 84. 15 days b. 53. 23 days c. 72. 28 days d. 100. 55 days e. 60. 83 days Cash conversion cycleAnswer: d Diff: M R [xliv]. Porta Stadium Inc. has annual sales of $80,000,000 and keeps average inventory of $20,000,000. On average, the firm has accounts receivable of $16,000,000. The firm buys all raw materials on credit, its trade credit terms are net 35 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by $4,000,000 and accounts receivable lowered by $2,000,000, what will be the net change in the cash conversion cycle? Use a 365-day year. Round to the closest whole day. a. +105 days b. -105 days c. +27 days d. -27 days e. -3 days Cash conversion cycleAnswer: e Diff: M R [xlv]. You have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year, what is your estimate of the firm’s current cash conversion cycle? †¢ Current inventory = $120,000. †¢ Annual sales = $600,000. †¢ Accounts receivable = $157,808. †¢ Accounts payable = $25,000. †¢ Total annual purchases = $365,000. †¢ Purchases credit terms: net 30 days. †¢ Receivables credit terms: net 50 days. a. 49 days b. 193 days c. 100 days d. 168 days e. 144 days Cash conversion cycleAnswer: b Diff: M [xlvi]. Kolan Inc. has annual sales of $36,500,000 ($100,000 a day on a 365-day basis). On average, the company has $12,000,000 in inventory and $8,000,000 in accounts receivable. The company is looking for ways to shorten its cash conversion cycle, which is calculated on a 365-day basis. Its CFO has proposed new policies that would result in a 20 percent reduction in both average inventories and accounts receivables. The company anticipates that these policies will also reduce sales by 10 percent. Accounts payable will remain unchanged. What effect would these policies have on the company’s cash conversion cycle? a. -40 days b. -22 days c. -13 days d. +22 days e. +40 days Cash conversion cycleAnswer: e Diff: M R [xlvii]. Gaston Piston Corp. as annual sales of $50,735,000 and maintains an average inventory level of $15,012,000. The average accounts receivable balance outstanding is $10,008,000. The company makes all purchases on credit and has always paid on the 30th day. The company is now going to take full advantage of trade credit and pay its suppliers on the 40th day. If sales can be maintained at existing levels but inventory can be lowered by $1, 946,000 and accounts receivable lowered by $1,946,000, what will be the net change in the cash conversion cycle? (Assume there are 365 days in the year. ) a. -14. 0 days b. -18. days c. -28. 0 days d. -25. 6 days e. -38. 0 days LockboxAnswer: e Diff: M [xlviii]. Cross Collectibles currently fills mail orders from all over the U. S. and receipts come in to headquarters in Little Rock, Arkansas. The firm’s average accounts receivable (A/R) is $2. 5 million and is financed by a bank loan with 11 percent annual interest. Cross is considering a regional lockbox system to speed up collections that it believes will reduce A/R by 20 percent. The annual cost of the system is $15,000. What is the estimated net annual savings to the firm from implementing the lockbox system? . $500,000 b. $ 30,000 c. $ 60,000 d. $ 55,000 e. $ 40,000 Changes in working capital and free cash flowAnswer: b Diff: M N [xlix]. Allen Brothers is interested in increasing its free cash flow (which it hopes will result in a higher EVA and stock price). The company’s goal is to generate $180 million of free cash flow over the upcoming year. Allen’s CFO has made the following projections for the upcoming year: †¢ EBIT is projected to be $850 million. †¢ Gross capital expenditures are expected to total $360 million, and its depreciation expense is expected to be $120 million. Thus, its net capital expenditures are expected to total $240 million. †¢ The firm’s tax rate is 40 percent. The company forecasts that there will be no change in its cash and marketable securities, nor will there be any changes in notes payable or accrued liabilities. Which of the following will enable the company to achieve its goal of generating $180 million in free cash flow? a. Accounts receivable increase $470 million, inventory increases $230 million, and accounts payable increase $790 million. b. Accounts receivable increase $470 million, inventory increases $230 million, and accounts payable increase $610 million. . Accounts receivable decrease by $500 million, inventory increases by $480 million, and accounts payable decline by $80 million. d. Accounts receivable decrease by $400 million, inventory increases by $480 million, and accounts payable increase by $80 million. e. Accounts receivable increase by $500 million, inventory increases by $100 million, and acc ounts payable decline by $480 million. Aging scheduleAnswer: b Diff: M N [l]. Short Construction offers its customer’s credit terms of 2/10, net 30 days, while Fryman Construction offers its customer’s credit terms of 2/10, net 45 days. The aging schedules for each of the two companies’ accounts receivable are reported below: Short Construction Fryman Construction Age ofValue of Percentage ofValue of Percentage of Account (Days) Account Total Value Account Total Value 0-10 $58,800 60%$ 73,500 50% 11-30 19,600 20 29,400 20 31-45 14,700 15 29,400 20 46-60 2,940 3 10,290 7 Over 60 1,960 2 4,410 3 Total Receivables $98,000$147,000 Which company has the greatest percentage of overdue accounts and what is their percentage of overdue accounts? . Fryman; 50% overdue. b. Short; 20% overdue. c. Fryman; 30% overdue. d. Fryman; 3% overdue. e. Short; 40% overdue. Tough: Cash conversion cycleAnswer: c Diff: T R [li]. Jordan Air Inc. has average inventory of $1,000,000. Its estimated annual sales are $10 million and the firm estimates its receivables conversion period to be twice as long as its inventory conversion period. The firm pays its trade credit on time; its terms are net 30 days. The firm wants to decrease its cash conversion cycle by 10 days. It believes that it can reduce its average inventory to $863,000. Assume a 365-day year and that sales will not change. By how much must the firm also reduce its accounts receivable to meet its goal of a 10-day reduction in its cash conversion cycle? a. $ 101,900 b. $1,000,000 c. $ 136,986 d. $ 333,520 e. $ 0 Multiple Part: (The following information applies to the next three problems. ) Callison Airlines is deciding whether to pursue a restricted or relaxed current asset investment policy. Callison’s annual sales are expected to total $3. 6 million, its fixed assets turnover ratio equals 4. 0, and its debt and common equity are each 50 percent of total assets. EBIT is $150,000, the interest rate on the firm’s debt is 10 percent, and the firm’s tax rate is 40 percent. If the company follows a restricted policy, its total assets turnover will be 2. 5. Under a relaxed policy, its total assets turnover will be 2. 2. Current asset investment policyAnswer: c Diff: M N [lii]. If the firm adopts a restricted policy, how much will it save in interest expense (relative to what it would be if Callison were to adopt a relaxed policy)? a. $ 3,233 b. $ 6,175 c. $ 9,818 d. $ 7,200 e. $10,136 Current asset investment policy and ROEAnswer: b Diff: M N [liii]. What is the difference in the projected ROEs between the restricted and relaxed policies? a. 2. 24% b. 1. 50% c. 1. 00% d. 0. 50% e. 0. 33% Current asset investment policy and ROEAnswer: a Diff: M N [liv]. Assume now the company expects that if it adopts a restricted policy, its sales will fall by 15 percent, EBIT will fall by 10 percent, but its total assets turnover, debt ratio, interest rate, and tax rate will remain the same. In this situation, what is the difference in the projected ROEs between the restricted and relaxed policies? a. 2. 24% b. 1. 50% c. 1. 00% d. 0. 50% e. 0. 33% CHAPTER 15 ANSWERS AND SOLUTIONS [i]. Working capitalAnswer: c Diff: E [ii]. Working capitalAnswer: d Diff: E N The correct answer is statement d. The current ratio is calculated as current assets divided by current liabilities. [iii]. Cash conversion cycleAnswer: b Diff: E Statement a is false. If inventory increases, and sales do not, more cash is being â€Å"tied up† in inventory so the cash conversion cycle is increased, not reduced. Statement b is true. If the company reduces its DSO, it is collecting its accounts receivables more efficiently, so it reduces the cash conversion cycle. Statement c is false. If the company pays its bills sooner, it uses its cash to pay off accounts payable, which increase its cash conversion cycle. [iv]. Cash budgetAnswer: e Diff: E [v]. Cash budgetAnswer: a Diff: E [vi]. Cash budgetAnswer: d Diff: E Statement a is false because depreciation is not a cash item. (Although depreciation will affect taxes, depreciation itself will not be included in the cash budget. The question asks â€Å"explicitly. †) Statement b is true because this is a cash transaction, so it should be included in the cash budget. Statement c is true because this is a cash transaction and should be included in the cash budget. Since statements b and c are correct, statement d is the correct choice. [vii]. Cash managementAnswer: a Diff: E Net float = Disbursements float Collections float; therefore the larger the disbursements float and the lower the collections float the better the cash management system. A lockbox is used to speed cash collections. If a firm’s outflows come due early in the month rather than uniformly this will necessitate a large line of credit. [viii]. Cash managementAnswer: d Diff: E Statements a and c are correct; therefore, statement d is the appropriate choice. A lockbox speeds collections of receivables; it doesn’t ensure that petty cash will be safe. Although depreciation is a noncash expense, it does affect taxes, which are a cash expense. [ix]. Cash managementAnswer: e Diff: E A very efficient cash management system could allow a firm to operate with positive net float where the firm has a negative checkbook balance at most times but still does not bounce its checks. The other statements are false. A good cash management system maximizes disbursement float and minimizes collections float. A well-designed lockbox system minimizes collections float which would increase a firm’s net float. Increases in interest rates raise the opportunity cost of idle cash. A firm prefers to write checks, maximizing its disbursement float and increasing its net float. [x]. LockboxAnswer: d Diff: E [xi]. Marketable securitiesAnswer: a Diff: E [xii]. Monitoring receivablesAnswer: b Diff: E [xiii]. Credit policyAnswer: e Diff: E [xiv]. Credit policyAnswer: d Diff: E [xv]. Inventory managementAnswer: d Diff: E [xvi]. Inventory managementAnswer: e Diff: E [xvii]. Miscellaneous working capital conceptsAnswer: e Diff: E N The correct answer is statement e. The cash conversion cycle is the cycle in which a firm purchases inventory, sells goods on credit, and then collects accounts receivable. [xviii]. Cash conversion cycleAnswer: d Diff: M [xix]. Cash conversion cycleAnswer: d Diff: M Statements a and b are correct; therefore, statement d is the appropriate choice. Delaying payments to suppliers increases the length of the cash conversion cycle. [xx]. Cash balancesAnswer: c Diff: M [xxi]. Cash budgetAnswer: e Diff: M [xxii]. Cash managementAnswer: e Diff: M [xxiii]. Marketable securities portfolioAnswer: d Diff: M [xxiv]. FloatAnswer: a Diff: M [xxv]. Compensating balancesAnswer: c Diff: M [xxvi]. Receivables managementAnswer: b Diff: M [xxvii]. Credit policy and seasonal datingAnswer: b Diff: M [xxviii]. DSO and aging scheduleAnswer: c Diff: M [xxix]. Days sales outstanding (DSO)Answer: c Diff: M [xxx]. Working capital policyAnswer: d Diff: M Statements a, b, c and e are all correct statements. Statement d is incorrect, and thus the correct choice. Holding minimal levels of inventory may result in lost sales. xxxi]. Miscellaneous conceptsAnswer: e Diff: M [xxxii]. Sales collectionsAnswer: d Diff: E [pic] = (0. 20)($38,000) + (0. 40)($33,000) + (0. 40)($30,000) = $32,800. [xxxiii]. FloatAnswer: d Diff: E Positive disbursement float = $15,000(5) = $75,000. Negative collections float = $17,000(3) = $51,000. Net float = $75,000 $51,000 = $24,000. [xxxiv]. Accounts receivable balanceAnswer: a Diff: E R Acco unts receivables = DSO Sales per day = 353) = $51,000. Net float = $75,000 $51,000 = $24,000. [xxxv]. Accounts receivable balanceAnswer: a Diff: E R Accounts receivables = DSO ? Sales per day = 35($2,027,773/365) = $194,444. [xxxvi]. Inventory conversion periodAnswer: b Diff: E N Inventory conversion period = [pic] = [pic] = 60. 83 days. [xxxvii]. Payables deferral periodAnswer: c Diff: E N Payables deferral period = [pic] = [pic] = 35. 46 days. [xxxviii]. Cash conversion cycleAnswer: d Diff: E Facts given: Payables deferral period = 30 days; Inv = $5,000,000; Rec. = $2,000,000; ADS = $100,000. [pic] = [pic] + [pic] – [pic]. Step 1:Determine the inventory conversion period: Inventory conversion period= Inventory/Daily sales = $5,000,000/$100,000 50 days. Step 2:Determine the receivables collection period: Receivables collection period= Receivables/Daily sales = $2,000,000/$100,000 = 20 days. Step 3:Given data and information calculated above, determine the firm’s cash conversion cycle: Cash conversion cycle= 50 + 20 30 = 40 days. [xxxix]. Cash conversion cycleAnswer: a Diff: E R [pic]= [pic] + [pic] – [pic] = 72 + 60 45 = 87 days. [xl] . Inventory turnover ratio and DSOAnswer: a Diff: E N Step 1:Determine sales level using the DSO equation. DSO = [pic] 50 = [pic] $100,000,000 = [pic] 36,500,000,000 = 50(Sales) $730,000,000 = Sales. Step 2:Calculate inventory turnover ratio. Inv. turnover = [pic] Inv. turnover = [pic] Inv. turnover = 5. 84. [xli]. Cash budgetAnswer: c Diff: M Construct a simplified cash budget: Sales $3,000 Collections (same month’s sales) 1,176 (0. 98 ? 0. 40 ? $3,000) Collections (last month’s sales) 1,800 (1. 00 ? 0. 60 ? $3,000) Total collections 2,976 Purchases payments 1,500 Other payments 700 Total payments 2,200 Net cash gain (loss) $ 776 [xlii]. ROE and working capital policyAnswer: c Diff: M Construct simplified comparative balance sheets and income statements for the restricted and relaxed policies:(In thousands) 15% of Sales 25% of Sales Restricted Relaxed Current assets $ 60 $100 Fixed assets 100 100 Total assets $160 $200 Debt 80 00 Equity and retained earnings 80 100 Total liabilities and equity $160 $200 EBIT 36 36 Less: Interest (10%) (8) (10) EBT 28 26 Less: Taxes (40%) ( 11. 2) ( 10. 4) Net income $ 16. 8 $ 15. 6 ROE = NI/Equity; $16. 8/$80 = 0. 21; $15. 6/$100 = 0. 156. ROE (restricted policy) = 21. 0%. ROE (relaxed policy) = 15. 6%. Difference in ROEs = 0. 21 0. 156 = 0. 054 = 5. 4%. xliii]. Inventory conversion periodAnswer: d Diff: M R Inventory conversion period (ICP) = [pic]. Annual sales = 12 ( $2 million = $24 million. Inventory = 0. 5 ( $2 million = $1 million. ICP = [pic] = 15. 2 days. [xliv]. Cash conversion cycleAnswer: e Diff: M N CCC = [pic]. I nventory conversion period = [pic] = [pic] = 53. 23 days. Receivables collection period = [pic] = [pic] = 38. 02 days. Payables deferral period = [pic] = [pic] = 30. 42 days. CCC = 53. 23 days + 38. 02 days 30. 42 days = 60. 83 days. [xlv]. Cash conversion cycleAnswer: d Diff: M R Old With Change ICP = [pic] = [pic] = 91. 5 [pic] = [pic] = 73. 000 + + DSO = [pic] = 73. 00 [pic] = 63. 875 DP = 35 days -35. 00 DP -35. 000 CCC =129. 25 days New CCC =101. 875 days Change in CCC = 101. 875 – 129. 25 = -27. 375 days ( -27 days. Net change is –27 days (CCC is 27 days shorter). [xlvi]. Cash conversion cycleAnswer: e Diff: M R Calculate each of the three main components of the cash conversion cycle: Inventory Conversion period (ICP): ICP = [pic] = [pic] = 73 days. Days sales outstanding (DSO): DSO = [pic] = [pic] = 96 days. Payables deferral period (PDP): PDP = [pic] = [pic] = 25 days. Cash conversion cycle (CCC): CCC = ICP + DSO – PDP = 73 + 96 – 25 = 144 days. [xlvii]. Cash conversion cycleAnswer: b Diff: M [pic] = [pic] + [pic] – [pic]. For this problem we are only interested in the change in the CCC. We may therefore ignore the Payables Deferral Period since it is assumed to remain unchanged. Old CCC (ignore payables) = $12,000,000/$100,000 + $8,000,000/$100,000 = 120 + 80 = 200 days. New CCC = $9,600,000/$90,000 + $6,400,000/$90,000 = 106. 67 + 71. 1 = 177. 78 days. Change in CCC = New CCC – Old CCC = 177. 78 – 200 = -22. 22 days. Round to 22 days shorter. [xlviii]. Cash conversion cycleAnswer: e Diff: M R First, calculate Sales/Day = $50,735,000/365 = $139,000. Then, calculate the old inventory conversion period: Inventory/Sales per day = $15,012,000/$139,000 = 108 days. Then, find the new inventory con version period: $13,066,000/$139,000 = 94 days. We have cut the inventory conversion period by 108 – 94 = 14 days. Then, calculate the old DSO: Accts. Rec. /Sales per day = $10,008,000/$139,000 = 72 days. Then, find the new DSO = $8,062,000/$139,000 = 58 days. We have cut the DSO by 72 – 58 = 14 days. Finally, find the total net change = -14 + (-14) – 10 = -38 days. [xlix]. LockboxAnswer: e Diff: M Calculate the net reduction in A/R: Current A/R = $2,500,000. New A/R with 20% reduction: $2,500,000 0. 20($2,500,000) = $2,000,000. Net reduction in A/R = $500,000. Calculate the interest savings and net savings: Interest savings = $500,000(0. 11) = $55,000. Net savings = Interest savings Annual lockbox cost = $55,000 $15,000 = $40,000. [l]. Changes in working capital and free cash flowAnswer: b Diff: M N FCF = EBIT(1 – T) + DEP – CapExp (NOWC 180,000,000 = $850,000,000(0. 6) + $120,000,000 $360,000,000 (NOWC $180,000,000 = $510,000,000 + $120,000,000 $360,000,000 (NOWC $180,000,000 = $270,000,000 (NOWC -$90,000,000 = -(NOWC (NOWC = $90,000,000. Net operating working capital needs to increase by $90 million, so we need to find the response that shows working capital increasing by that amount. Statement a is false because (NOWC = $470,000,000 + $230,000,000 $790,000,000 = -$90,000,000. Statement b is true because (NOWC = $470,000,000 + $230,000,000 $610,000,000 = +$90,000,000. Statement c is false because (NOWC = -$500,000,000 + $480,000,000 – (-$80,000,000) = +$60,000,000. Statement d is false because (NOWC = -$400,000,000 + $480,000,000 $80,000,000 = $0. Statement e is false because (NOWC = $500,000,000 + $100,000,000 – (-$480,000,000) = $1,080,000,000. [li]. Aging scheduleAnswer: b Diff: M N Short’s credit policy is 2/10, net 30 days, so customers’ receivables are overdue after 30 days. The percentage of accounts overdue (after 30 days) is 15% + 3% + 2% = 20%. Fryman’s credit policy is 2/10, net 45 days, so customers’ receivables are overdue after 45 days. The percentage of accounts overdue (after 45 days) is 7% + 3% = 10%. Thus, Short has the greatest percentage of overdue accounts at 20%. (Note that you could also use the dollar amounts to develop the total percentage of overdue accounts, but you would arrive at the same answer. ) Alternative solution using dollar amounts of receivables: Short: [pic] = 20%. Fryman: [pic] = 10%. [lii]. Cash conversion cycleAnswer: c Diff: T R ICP = 365 days/($10 million/$1 million) = 36. 5 days. DSO = 2. 0 ( ICP = 73 days. Solve for accounts receivable: DSO = 73 = Accounts receivable/Sales per day = (A/R)/($10/365) = $2 million. Calculate new ICP, change in CCC, and new DSO required to meet goal: New ICP = 365/($10/$0. 863) = 365/11. 5875 = 31. 5 days. Net change in ICP = -5 days. Total reduction in CCC required = 10 days. Reduction in DSO needed = 10 – 5 = 5 days. New DSO required = 73 – 5 = 68 days. Solve for new receivables level: DSO = 68 = [(A/R)/($10,000,000/365)] A/R = 68 ( $27,397. 26 = $1,863,014. Old A/R = $2,000,000. New A/R = $1,863,014. Reduction required in A/R = $2,000,000 $1,863,014 = $136,986. [liii]. Current asset investment policyAnswer: c Diff: M N Step 1:Calculate net fixed assets, which will be the same under either policy. FA turnover = [pic] 4. 0 = [pic] NFA = $900,000. Step 2:Determine total assets under each policy, given the total assets turnover ratio for each one. Restricted: Total assets turnover = [pic] 2. 5 = [pic] TA = $1,440,000. Relaxed: 2. 2 = [pic] TA = $1,636,364. Step 3:Develop balance sheets for each policy to determine the debt level. Restricted Relaxed Current assets $ 540,000 $ 736,364 Fixed assets 900,000 900,000 Total assets $1,440,000 $1,636,364 Debt $ 720,000 $ 818,182 Equity 720,000 818,182 Total liabilities equity $1,440,000 $1,636,364 Step 4:Determine interest under each policy: Restricted: $720,000 ( 0. 10 = $72,000. Relaxed: $818,182 ( 0. 10 = $81,818. Step 5:Calculate the difference in interest expense (the savings) between the 2 policies: $81,818 $72,000 = $9,818. [liv]. Current asset investment policy and ROEAnswer: b Diff: M N Step 1:From the previous problem we can now set up an income statement for each policy. Restricted Relaxed EBIT $150,000 $150,000 Interest (10%) 72,000 81,818 EBT $ 78,000 $ 68,182 Taxes 31,200 27,273 Net income $ 46,800 $ 40,909 Step 2:Calculate ROE using common equity as calculated in the prior problem for each policy. Restricted: ROE = [pic]Relaxed: ROE = [pic] = 6. 5%. = 5. 0%. Step 3:Calculate the difference in ROEs. ROE = 6. 5% 5. 0% = 1. 5%. [lv]. Current asset investment policy and ROEAnswer: a Diff: M N From the prior two problems, we know that the ROE for the relaxed policy is 5%. Now, we need to calculate the new ROE under the restricted policy. Step 1:Calculate the new sales and EBIT levels. New sales = $3,600,000 ( 0. 85 = $3,060,000. New EBIT = $150,000 ( 0. 90 = $135,000. Step 2:Calculate the new level of assets under the restricted policy. S/TA = 2. 5 $3,060,000/2. 5 = $1,224,000. Step 3:Develop the firm’s balance sheet under the restricted policy. Total assets $1,224,000 Debt $ 612,000 Equity 612,000 Total liabilities equity $1,224,000 Step 4:Develop the firm’s income statement under the restricted policy. EBIT $135,000 Interest (10%) 61,200 EBT $ 73,800 Taxes (40%) 29,520 Net income $ 44,280 Step 5:Calculate the firm’s ROE under the restricted policy. ROE = NI/E = $44,280/$612,000 ROE = 7. 24%. Step 6:Calculate the difference in ROEs between the 2 policies. (ROE = 7. 24% 5% = 2. 24%c