Chapter 10

Question 1

cash flow timeline

Answer 1

• describes conversion of noncurrent assets and liabilities to cash
• = procure-to-pay period + inventory period + order-to-cash period
• treasury professionals optimize liquidity by (1) LONGER procure-to-pay time and (2) SHORTER order-to-cash time

Question 2

inventory timeline period

Answer 2

time to turn raw materials –> finished goods and sell them

• starts: after raw materials/retail goods are received
• ends: when goods are sold

Question 3

order-to-cash period

Answer 3

includes tasks to solicit customers, sell inventory –> cash

• final piece of operating cylce
• represents a cash inflow

Question 4

float

Answer 4

time/delay btwn. stat and end of a phase/process in the cash flow timeline

ironically, “float” is often used to refer to disbursement/collection float, but this is the smallest/lease concerning piece of float to Tsy profs.

Question 5

payment float

Answer 5

period of time btwn when the day an invoice is sent/rcvd. and the day payment is credited to the biller’s bank account

• often the largest float component

Question 6

invoicing float

Answer 6

time btwn when a buyer

• orders goods/svcs, and
• receives invoice

Question 7

collection float (two sub-categories)

Answer 7

mail float - day a payment is mailed –> day rcvd. by payee

processing float - payee rcvs. payment –> payment is deposited into his acct.

Question 8

availability float

Answer 8

day when pmt is deposited –> acct actually credited