advanced issues in cash management and inventory control

1.What is the basic idea of zero working capital and how is working capital defined for this purpose?

2.How has technology changed the way target cash balances are set.

3.What is the Baumol model, and how is it used?

4.Explain how Monte Carlo simulation can be used to help set a firm’s target cash balance.

5.Discuss the following inventory control systems that are used in practice.

Red-line method –

Two-bin method –

Computerized inventory control systems –

6.What are just-in-time systems? What are their advantages? Why is quality especially important if a JIT system is used?

7.What is outsourcing?

8.Describe the relationship between production scheduling and inventory levels.

9.List and describe the four methods used to account for inventory?

10.What effect does each inventory method used have on the firm’s reported profits and ending inventory levels?

11.Which inventory method should be used if management anticipates a period of inflation? Why?

12.What are some specific inventory carrying costs? Are these costs fixed or variable?

13.What are some inventory ordering costs? Are these costs fixed or variable?

14.What are the components of total inventory costs?

15.What is the concept behind the EOQ model?

16.What is the relationship between total carrying costs and total ordering costs at the EOQ?

17.What assumptions are inherent in the EOQ model as presented in the chapter?

18.Why are safety stocks required?

19.Conceptually, how would you evaluate a quantity discount offer from a supplier?

20.What effect does inflation typically have on the EOQ?

21.Can the EOQ model be used when a company faces seasonal demand fluctuations? Explain.

22.What effect do minor deviations from the EOQ have on total inventory cost?