3FA3-CH18.docx

Commerce 3FA3 Chapter 18 ShortTerm Finance and Planning Operating Cycle The time period between the acquisition of inventory and when cash is collected from receivablesInventory period The time it takes to acquire and sell inventoryAccounts receivable period The time between sale of inventory and collection of the receivable Accounts payable period The time between the receipt of inventory and payment for itCash Cycle The time between cash disbursement and cash collectionCash flow time line Graphical representation of the operating cycle and the cash cycle Carrying costs Costs that rise with increases in the level of investment in current assetsShortage costs Costs that fall with increases in the level of investment in current assets Cash Budget A forecast of cash receipts and disbursements for the next planning per