Home Library Explore SAT

Home Library Explore SAT

Liquidity Speed Flashcards | StudBud

Explore/Liquidity Speed

Liquidity Speed

7 terms·StudBud Administration·25 plays

Covering speed of liquidity indicators

Flashcards7 cardsFPractice quizPHost liveL

Questions 7

Answers

1
What does Cash Flow Cover (CFC) provide a measurement of?
No. of times bank balance can cover average CL's
The net operating cash flows for the period
No. of times net operating cash flows can cover average CL's
% of average CL level that can be covered by cash flows
2
Is Debtors Turnover satisfactory or unsatisfactory? Why?
Unsatisfactory - it is less than Stock Turnover
Satisfactory - it is greater than customer credit terms
Satisfactory - it is no more than 1 month
Unsatisfactory - it is greater than customer credit terms
3
What does Stock Turnover measure?
The average number of days before stock is damaged
The average number of days to convert stock into sales
Stock as a proportion of total assets
The average delivery times for stock purchases
4
What is a negative consequence of CTO exceeding the credit terms offered by suppliers?
Having more time to pay creditors
Possible loss of credit facilities
Creditors Turnover could exceed Debtors Turnover
Cash levels in the business will decrease
5
Why is it important for liquidity that Net Cash Flows from Operations is positive?
To provide funds for future investments
To provide the owner with income for living
To pay business debts without needing more finance or help
To ensure the business makes a profit
6
What is not a strategy to improve Debtors Turnover for this business?
Increase credit terms offered to 30 days as well
Extensive credit checks of credit customers
Threats of legal action
Sending reminder notices
7
Why is a fast Stock Turnover beneficial for liquidity?
The business can generate more cash from the sale of stock
It's not - a slow Stock Turnover is better for a business
Less stock is kept on hand
It allows a business to increase their price mark-up