Question 1

The payback period technique does not consider the time value of money.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements about capital budgeting practices in small firms is true?

Accepted Answer

A)  A large number of owners rely on discounted cash flow (DCF) techniques. 
B)  Small business owners are not very sophisticated about using theoretically sound financial methods. 
C)  In the past, most small business owners relied on the internal rate of return (IRR) method to make capital budgeting decisions. 
D)  Most small business owners today are unwilling to learn how to use discounted cash flow (DCF) tools. 
A)  A large number of owners rely on discounted cash flow (DCF) techniques. 
B)  Small business owners are not very sophisticated about using theoretically sound financial methods. 
C)  In the past, most small business owners relied on the internal rate of return (IRR) method to make capital budgeting decisions. 
D)  Most small business owners today are unwilling to learn how to use discounted cash flow (DCF) tools.

Question 3

A company with accounts payable of $35,000 and cost of goods sold of $300,000 would have days in payables of _____ days.

Accepted Answer

A)  24 
B)  32 
C)  43 
D)  27 
A)  24 
B)  32 
C)  43 
D)  27

Question 4

Dana produces fine chocolates for her retail shop, which is open six days a week. The sales are $156,000 annually, with a cost of goods sold of 45% of sales and inventory of 5%. Calculate the days in inventory, and indicate any concerns for the shop considering the national average is 15 days.

Accepted Answer

@#IMG-DLM& ​ @#IMG-DLM& ​ @#IMG-DLM& ​
Dana is carrying inventory for

Question 5

Small business managers tend to overbuy inventory due to not understanding inventory management.

Accepted Answer

A) True 
 B)False

Question 6

A company has 30 days in payables, 15 days in inventory, and 20 days sales outstanding. How many days are in the company's cash conversion period?

Accepted Answer

A)  5 
B)  25 
C)  45 
D)  65 
A)  5 
B)  25 
C)  45 
D)  65

Question 7

Match the term with its definition.
-The time required to convert paid-for inventory and accounts receivable into cash

Accepted Answer

A) cash conversion period 
B) days in inventory 
C) days in payables 
D) days sales outstanding (average collection period) 
E) lock box
F)working capital cycle
G)working capital management 
A) cash conversion period 
B) days in inventory 
C) days in payables 
D) days sales outstanding (average collection period) 
E) lock box
F)working capital cycle
G)working capital management

Question 8

Lucinda has decided to use a _____ to speed up the processing of invoice payments.

Accepted Answer

A)  customer box 
B)  deposit box 
C)  lock box 
D)  mailbox 
A)  customer box 
B)  deposit box 
C)  lock box 
D)  mailbox

Question 9

Which of the following is a reason why small business managers tend to overbuy inventory?

Accepted Answer

A)  They forecast greater demand than is realistic. 
B)  Vendors insist that prices may be going down. 
C)  They don't want to disappoint vendors and suppliers. 
D)  Maximizing inventory is a good way to decrease taxes. 
A)  They forecast greater demand than is realistic. 
B)  Vendors insist that prices may be going down. 
C)  They don't want to disappoint vendors and suppliers. 
D)  Maximizing inventory is a good way to decrease taxes.

Question 10

Carrie's decision to research a new product for her children's party business is considered an example of a capital budgeting decision.

Accepted Answer

A) True 
 B)False

Question 11

Match the term with its definition.
-The number of days, on average, that a business takes to pay its accounts payable

Accepted Answer

A) cash conversion period 
B) days in inventory 
C) days in payables 
D) days sales outstanding (average collection period) 
E) lock box
F)working capital cycle
G)working capital management 
A) cash conversion period 
B) days in inventory 
C) days in payables 
D) days sales outstanding (average collection period) 
E) lock box
F)working capital cycle
G)working capital management

Question 12

Terms of 2/10, net 30 offer a 2% potential discount.

Accepted Answer

A) True 
 B)False

Question 13

The management of a small firm's long-term assets is called capital budgeting.

Accepted Answer

A) True 
 B)False

Question 14

The number of days, on average, that a firm extends credit to its customers is called

Accepted Answer

A)  the cash conversion period 
B)  days in inventory. 
C)  days sales outstanding. 
D)  the cash flow cycle. 
A)  the cash conversion period 
B)  days in inventory. 
C)  days sales outstanding. 
D)  the cash flow cycle.

Question 15

Which of the following is NOT a technique for making capital budgeting decisions?

Accepted Answer

A)  Accounting return on investment 
B)  Internal rate of return 
C)  Quantitative forecasting 
D)  Payback period 
A)  Accounting return on investment 
B)  Internal rate of return 
C)  Quantitative forecasting 
D)  Payback period

Question 16

Which of the following would be a capital budgeting decision that a small firm might need to make?

Accepted Answer

A)  Replacing delivery trucks with newer models 
B)  Issuing new stock 
C)  Negotiating a new supplier contract 
D)  Computing quarterly labor costs 
A)  Replacing delivery trucks with newer models 
B)  Issuing new stock 
C)  Negotiating a new supplier contract 
D)  Computing quarterly labor costs

Question 17

Improperly managed and uncontrolled stockpiling may greatly increase inventory carrying costs and place a heavy drain on the funds of a small business.

Accepted Answer

A) True 
 B)False

Question 18

Monitoring cash flows is at the core of working capital management.

Accepted Answer

A) True 
 B)False

Question 19

The terms 2/10, net 45 offer a _____% discount on purchases paid for within _____ days.

Accepted Answer

A)  2; 45 
B)  10; 2 
C)  2; 10 
D)  10; 45 
A)  2; 45 
B)  10; 2 
C)  2; 10 
D)  10; 45

Question 20

Monthly cash deposits less checks written during the same period equal a firm's

Accepted Answer

A)  net cash flow. 
B)  net profit. 
C)  net working capital. 
D)  operating profit. 
A)  net cash flow. 
B)  net profit. 
C)  net working capital. 
D)  operating profit.

Exam 22: Managing the Firms Assets

The payback period technique does not consider the time value of money.

Which of the following statements about capital budgeting practices in small firms is true?

A company with accounts payable of $35,000 and cost of goods sold of $300,000 would have days in payables of _____ days.

Dana produces fine chocolates for her retail shop, which is open six days a week. The sales are $156,000 annually, with a cost of goods sold of 45% of sales and inventory of 5%. Calculate the days in inventory, and indicate any concerns for the shop considering the national average is 15 days.

Small business managers tend to overbuy inventory due to not understanding inventory management.

A company has 30 days in payables, 15 days in inventory, and 20 days sales outstanding. How many days are in the company's cash conversion period?

Match the term with its definition. -The time required to convert paid-for inventory and accounts receivable into cash

Lucinda has decided to use a _____ to speed up the processing of invoice payments.

Which of the following is a reason why small business managers tend to overbuy inventory?

Carrie's decision to research a new product for her children's party business is considered an example of a capital budgeting decision.

Match the term with its definition. -The number of days, on average, that a business takes to pay its accounts payable

Terms of 2/10, net 30 offer a 2% potential discount.

The management of a small firm's long-term assets is called capital budgeting.

The number of days, on average, that a firm extends credit to its customers is called

Which of the following is NOT a technique for making capital budgeting decisions?

Which of the following would be a capital budgeting decision that a small firm might need to make?

Improperly managed and uncontrolled stockpiling may greatly increase inventory carrying costs and place a heavy drain on the funds of a small business.

Monitoring cash flows is at the core of working capital management.

The terms 2/10, net 45 offer a _____% discount on purchases paid for within _____ days.

Monthly cash deposits less checks written during the same period equal a firm's

The Entrepreneurial Lifethe Entrepreneurial Life

Integrity, Ethics, and Social Entrepreneurship

Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Businesses

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

Managing Risk

Filters

The terms 2/10, net 45 offer a _% discount on purchases paid for within _ days.