Karen Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her company's working capital policy in light of a recent scare she faced when RR's corporate banker, citing a nationwide credit crunch, balked at renewing RR's line of credit. Had the line of credit not been renewed, RR would not have been able to make payroll, potentially forcing the company out of business. Although the line of credit was ultimately renewed, the scare has forced Johnson to examine carefully each component of RR's working capital to make sure it is needed, with the goal of determining whether the line of credit can be eliminated entirely. In addition to (possibly) freeing RR from the need for a line of credit, Johnson is well aware that reducing working capital will improve free cash flow.

Historically, RR has done little to examine working capital, mainly because of poor communication among business functions. In the past, the production manager resisted Johnson's efforts to question his holdings of raw materials, the marketing manager resisted questions about finished goods, the sales staff resisted questions about credit policy (which affects accounts receivable), and the treasurer did not want to talk about the cash and securities balances. However, with the recent credit scare, this resistance has become unacceptable and Johnson has undertaken a company-wide examination of cash, marketable securities, inventory, and accounts receivable levels.

Johnson also knows that decisions about working capital cannot be made in a vacuum. For example, if inventories could be lowered without adversely affecting operations, then less capital would be required, and free cash flow would increase. However, lower raw materials inventories might lead to production slowdowns and higher costs, and lower finished goods inventories might lead to stockouts and loss of sales. So, before inventories are changed, it will be necessary to study operating as well as financial effects. The situation is the same with regard to cash and receivables. Johnson has begun her investigation by collecting the ratios shown here. (The partial cash budget shown after the ratios is used later in this mini case.)

QUESTION 13 1 po An increase in consumer spending caused by an increase in consumer confidence would cause a movement down and to the right along the aggregate demand curve. the aggregate demand curve to shift up and to the right. () a movement up and to the left along the aggregate demand curve. the aggregate demand curve to shift down and to the left. QUESTION 14 1 pomandeep singh: Attempt 1 A project manager is undertaking Cost Benefit analysis that will be presented to Senior Management for review and making final decisions. Which of the following actions should the project Manager do to BEST benefit Senior Management? O Run a Cost-Benefit Variance Analysis (CBVA) report Form a Cost-Benefit problem-solving team O Eliminate a number of potential trade-offs so senior management will require less time to make decisions Develop a viable business case for each alternative approachQuestion 14 0/2pts Simultaneous recession and deflation can be explained by: an increase in aggregate supply. an increase in aggregate demand. O a decrease in aggregate demand. a decrease in aggregate supply. Question 15 0/2 pts Which of the following tends to make aggregate demand decrease by more than the amount that consumer spending decreases? the interest rate effect the crowding-out effect the multiplier effect the wealth effectQuestion 47 A simultaneous increase in inflation and decrease in economic growth in a country can be associated with: O a decrease in aggregate demand with no change in aggregate supply. O an increase in aggregate demand and aggregate supply. )an increase in aggregate supply with no change in aggregate demand. a decrease in aggregate supply and aggregate demand. O a decrease in aggregate supply with no change in aggregate demand