Question 1

Match the term with its definition.
-The rate of return a firm expects to earn on a project

Accepted Answer

A) accounting return on investment technique 
B) capital budgeting analysis 
C) discounted cash flow (DCF) techniques 
D) internal rate of return (IRR) 
E) net present value (NPV)
F)payback period technique
G)pledged accounts receivable 
A) accounting return on investment technique 
B) capital budgeting analysis 
C) discounted cash flow (DCF) techniques 
D) internal rate of return (IRR) 
E) net present value (NPV)
F)payback period technique
G)pledged accounts receivable

Question 2

List some credit management practices that can have a positive effect on a firm's cash flows.

Accepted Answer

The following credit management practice

Question 3

A firm will have difficulty attracting investors if an investment outlay has an internal rate of return below the firm's cost of capital.

Accepted Answer

A) True 
 B)False

Question 4

Under the net present value (NPV) method, the rate of return required to satisfy the firm's investors is the

Accepted Answer

A)  opportunity cost. 
B)  internal rate of return. 
C)  cost of capital. 
D)  accounting return on investment. 
A)  opportunity cost. 
B)  internal rate of return. 
C)  cost of capital. 
D)  accounting return on investment.

Question 5

Given the terms of 3/10, net 30, a company should pay accounts payable on day 30 if funds are available.

Accepted Answer

A) True 
 B)False

Question 6

Owen was surprised when he calculated the percentage annual interest rate on his accounts payable. He discovered that failure to take advantage of the discount offered by suppliers

Accepted Answer

A)  makes a small difference because a business does not pay a high interest rate. 
B)  makes a large difference because a business pays a high interest rate. 
C)  has no effect on cash flows. 
D)  will have erratic effects on rates for the use of a supplier's money. 
A)  makes a small difference because a business does not pay a high interest rate. 
B)  makes a large difference because a business pays a high interest rate. 
C)  has no effect on cash flows. 
D)  will have erratic effects on rates for the use of a supplier's money.

Question 7

The payback period technique measures how long it will take to recover the initial cash outlay of an investment.

Accepted Answer

A) True 
 B)False

Question 8

Factoring account receivables involves the business selling its accounts receivable to a finance company, and the finance company assumes the bad-debt risk associated with the receivables it buys.

Accepted Answer

A) True 
 B)False

Question 9

Inventory is a "necessary evil" in a financial management system. It is an "evil" because

Accepted Answer

A)  it ties up funds that are not actively productive. 
B)  supply and demand cannot be managed to coincide precisely with day-to-day operations. 
C)  it reduces cash when it is sold. 
D)  it deteriorates; therefore, a certain percent is lost to spoilage and waste. 
A)  it ties up funds that are not actively productive. 
B)  supply and demand cannot be managed to coincide precisely with day-to-day operations. 
C)  it reduces cash when it is sold. 
D)  it deteriorates; therefore, a certain percent is lost to spoilage and waste.

Question 10

Lester is watching the bank balance decline throughout the month and hopes his company won't run out of money before it runs out of month. Lester is concerned about the net cash flow, which is the

Accepted Answer

A)  difference between cash inflows and outflows. 
B)  difference between revenues and expenses. 
C)  same as net profit. 
D)  same as working capital plus inventory. 
A)  difference between cash inflows and outflows. 
B)  difference between revenues and expenses. 
C)  same as net profit. 
D)  same as working capital plus inventory.

Question 11

Depreciation is a cash outflow.

Accepted Answer

A) True 
 B)False

Question 12

The first step in the working capital cycle process is to

Accepted Answer

A)  order inventory. 
B)  purchase or produce inventory for sale. 
C)  receive inventory. 
D)  sell the inventory for cash or credit. 
A)  order inventory. 
B)  purchase or produce inventory for sale. 
C)  receive inventory. 
D)  sell the inventory for cash or credit.

Question 13

Discounted cash flow (DCF) techniques answer which of the following questions?

Accepted Answer

A)  Do the cash returns of the investment exceed the cash outlays? 
B)  How does the present value of future benefits from the investment compare to the investment outlay? 
C)  How long will it take to recover the original investment outlay? 
D)  How many dollars in average profits are generated per dollar of average investment? 
A)  Do the cash returns of the investment exceed the cash outlays? 
B)  How does the present value of future benefits from the investment compare to the investment outlay? 
C)  How long will it take to recover the original investment outlay? 
D)  How many dollars in average profits are generated per dollar of average investment?

Question 14

Nadine would like to improve the management of inventory in her company. One of her first activities should be to

Accepted Answer

A)  discount current items. 
B)  discover how long items have been in inventory. 
C)  organize current items by skew number. 
D)  purchase new items. 
A)  discount current items. 
B)  discover how long items have been in inventory. 
C)  organize current items by skew number. 
D)  purchase new items.

Question 15

In step 3 of the working capital cycle,

Accepted Answer

A)  accounts payable are paid. 
B)  accounts receivable are collected. 
C)  inventory is sold on credit. 
D)  cash is increased. 
A)  accounts payable are paid. 
B)  accounts receivable are collected. 
C)  inventory is sold on credit. 
D)  cash is increased.

Question 16

By buying on credit, a small business is using creditors' funds to supply long-term cash needs.

Accepted Answer

A) True 
 B)False

Question 17

The cash conversion period is the time between _____ and _____.

Accepted Answer

A)  cash payment for inventory; collection of accounts receivable 
B)  placement of an order; cash payment for it 
C)  receipt of inventory; cash payment for it 
D)  sale of inventory; cash collection of accounts receivable 
A)  cash payment for inventory; collection of accounts receivable 
B)  placement of an order; cash payment for it 
C)  receipt of inventory; cash payment for it 
D)  sale of inventory; cash collection of accounts receivable

Question 18

Define capital budgeting, and provide examples of the types of capital budgeting decisions that a small business owner would make.

Accepted Answer

Capital budgeting is the management of a

Question 19

A firm's working capital cycle refers to the flow of cash to purchase and sell fixed assets.

Accepted Answer

A) True 
 B)False

Question 20

The goal of the cash conversion period is to have as few days as possible in the process so as to be able to finance other activities with working capital.

Accepted Answer

A) True 
 B)False

Exam 22: Managing the Firms Assets

Match the term with its definition. -The rate of return a firm expects to earn on a project

List some credit management practices that can have a positive effect on a firm's cash flows.

A firm will have difficulty attracting investors if an investment outlay has an internal rate of return below the firm's cost of capital.

Under the net present value (NPV) method, the rate of return required to satisfy the firm's investors is the

Given the terms of 3/10, net 30, a company should pay accounts payable on day 30 if funds are available.

Owen was surprised when he calculated the percentage annual interest rate on his accounts payable. He discovered that failure to take advantage of the discount offered by suppliers

The payback period technique measures how long it will take to recover the initial cash outlay of an investment.

Factoring account receivables involves the business selling its accounts receivable to a finance company, and the finance company assumes the bad-debt risk associated with the receivables it buys.

Inventory is a "necessary evil" in a financial management system. It is an "evil" because

Lester is watching the bank balance decline throughout the month and hopes his company won't run out of money before it runs out of month. Lester is concerned about the net cash flow, which is the

Depreciation is a cash outflow.

The first step in the working capital cycle process is to

Discounted cash flow (DCF) techniques answer which of the following questions?

Nadine would like to improve the management of inventory in her company. One of her first activities should be to

In step 3 of the working capital cycle,

By buying on credit, a small business is using creditors' funds to supply long-term cash needs.

The cash conversion period is the time between _____ and _____.

Define capital budgeting, and provide examples of the types of capital budgeting decisions that a small business owner would make.

A firm's working capital cycle refers to the flow of cash to purchase and sell fixed assets.

The goal of the cash conversion period is to have as few days as possible in the process so as to be able to finance other activities with working capital.

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 cash conversion period is the time between _ and _.