Review:

1. Gross working capital: It involves current assets and current liabilities of a business

Net working capital: This is the difference between total current assets and total current liabilities.

3. Float:

a. Disbursement float: amount of time that elapses between check payment and the actual time the

funds are removed from ones account

b. Collection float: the time that elapses between depositing debtors check into your own account

and the time the check funds are placed into your account

Businesses can take advantage paying by check because they can collect interest on the funds still in

their accounts since it takes a while for the funds to be removed, check to be cashed.

7. The five Cs are: Character, Capacity, Capital, Collateral, and Conditions. These are guidelines to

determine if a potential credit customer would pay their bills on time or default.

9. The ABC analysis in regards to inventory is to determine the importance of the inventory item to the

success of the business. This method breaks it down: A items make up most total costs at 75%, B items

make up 10-15%, and C items make up the remaining 10-15%.

11. A line of credit is like a credit card because it gives us a credit limit and we dont have to pay unless we

borrow. Its also obtained from a bank but is determined by the maximum estimated cash requirement

that exceeds cash income.

Exercises and Problems

5. A. account turnover = credit sales/accounts receivable

500,000/60,000 = 8.33

B. Collection day: 365/accounts receivable turnover, which is 8.33 approx. 44 days

C. He must speed up collection

11. List price-trade discount = discounted price

 $400 ($400 x 0.25) = $300

Discounted price minus the second discount is

$300 - ($300 x .15) = $255

Second discounted price minus the third discounted price is

$255 ($255 x .05) = $242.24

Case Study:

1. Another type of business that relies on this sort of customer service would be a wedding coordinator

who is her own boss. I have a friend who is a wedding coordinator, all her clients are through friends of

the brides she has worked with, former bridesmaid, aunts, friends of friends -all referrals. She doesnt

advertise explicitly but its through word of the mouth.

2. The trust and integrity elements in the business are so important -this is a fine jewelry business where

customers are spending a lot of money for quality work and service and the owner is providing all that

and more. I looked through the site and the gems that she is selling are very high quality and customers

want whatever gem theyre buying for that anniversary, birthday, engagement event to be special.

3. Before going on vacation, she must notify all her clients via email or phone that shell be going on

vacation and wont be able to answer messages or even have any appointments made. She can also

notify her clients when shell be back. She can send an email a month prior and tell her clients to meet

up and discuss potential purchases before vacationing.

4. I would make sure to have an excel sheet, keeping track of all my clients, the dates of special holidays,

their personality types -and their spouses. Keep note of everything as in, once your conversation is over

with that person, make sure youve taken notes on the personality, what theyre looking for so that you

can keep them in mind to help them with future purchases. Remind them of upcoming special occasions

through email or even better, a phone call.