Term
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Definition
| What the Yankee peddler sold or "turned over" to produce profits. |
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Term
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Definition
| Money borrowed from bank to pay for merchandise to be sold |
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Term
| Working capital on the balance sheet |
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Definition
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Term
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Definition
| Current assets - Current liabilities |
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Term
| Net operating working capital |
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Definition
| Current assets - (Current liabilities - Notes payable) |
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Term
| Relaxed working capital investment policy |
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Definition
| High levels of cash, marketable securities, receivables and inventories relative to sales |
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Term
| Restricted working capital investment policy |
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Definition
| Low levels of cash, marketable securities, receivables and inventories relative to sales |
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Term
| Moderate working capital investment policy |
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Definition
| Middle levels of cash, marketable securities, receivables and inventories relative to sales |
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Term
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Definition
| Current assets that a firm must carry even at the trough of seasonal or economic cycles |
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Term
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Definition
| Current assets that fluctuate with seasonal or economic cycles |
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Term
| Current assets financing policy |
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Definition
| The manner in which current assets are financed |
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Term
| Maturity Matching or "Self-Liquidating" Approach |
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Definition
| A financing policy that matches the maturities of assets and liabilities (a moderate policy) |
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Term
| Aggressive Approach to financing working capital |
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Definition
| A financing policy that finances some of its permanent assets with short term debt |
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Term
| Conservative Approach to financing working capital |
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Definition
| A financing policy that employs a small amount of short term credit to meet peak working capital requirements |
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Term
| Risk of aggressive approach to financing working capital |
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Definition
| Short term interest rates fluctuate more than long term rates and a temporary recession may make rolling over short term debt impossible. |
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Term
| Cash Conversion Cycle (CCC) |
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Definition
| The length of time funds are tied up in working capital, or the length of time between paying for working capital and collecting cash from the sale of working capital |
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Term
| Inventory conversion period |
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Definition
| The average time required to convert raw materials into finished goods and then to sell them |
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Term
| Average collection period |
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Definition
| The average length of time required to convert the firm's receivables into cash, that is, to collect cash following a sale |
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Term
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Definition
| The average length of time between the purchase of materials and labor and the payment of cash for them |
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Term
| Research results of shortening cash conversion cycle |
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Definition
| Hyun-Han Shin and Luc Soenen performed research to demonstrate that shortening the cash conversion cycle raises profits and produces better stock price performance |
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Term
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Definition
| A post office box operated by a bank to which payments are sent. Used to speed up effect receipt of cash |
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Term
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Definition
| Debt arising from credit sales and recorded as account receivable by the seller and as an account payable by the buyer |
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Term
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Definition
| A document specifying the terms and conditions of a loan, including the amount, interest rate, and repayment schedule |
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Term
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Definition
| An arrangement in which a bank agrees to lend up to a specified maximum amount of fund during a designated period |
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Term
| Revolving credit agreement |
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Definition
| A formal committed line of credit extended by a bank or other lending institution |
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Term
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Definition
| A published interest rate charged by commercial banks to large, strong borrowers |
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Term
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Definition
| Unsecured, short term promissory notes of large firms, usually issued in denominations of $100,000 or more with an interest rate somewhat below the prime rate |
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Term
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Definition
| Continually recurring short-term liabilities, especially accrued wages and accrued taxes |
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Term
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Definition
| Funds that are generated spontaneously as the firm expands |
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Term
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Definition
| A loan backed by collateral, often inventories or account receivable. Could also be backed by equipment, buildings, or land. |
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Term
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Definition
| Funds due from a customer |
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Term
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Definition
| A set of rules that include the firm's credit period, discounts, credit standards, and collection procedures offered |
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Term
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Definition
| The length of time customers have to pay for purchases |
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Term
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Definition
| Price reductions given for early payment |
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Term
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Definition
| The financial strenth customers must exhibit to qualify for credit |
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Term
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Definition
| Degree of toughless in enforcing the credit terms |
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Term
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Definition
| Statement of the credit period and any discounts offered |
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Term
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Definition
| A numerical score that indicates the likelihood that a person or business will pay on time |
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