Question 1

Carrying costs are associated with having current assets and fall into which general category?

Accepted Answer

A)  The opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets. 
B)  Explicit costs necessary to maintain the value of current assets. 
C)  both a and b 
D)  neither a or b 
A)  The opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets. 
B)  Explicit costs necessary to maintain the value of current assets. 
C)  both a and b 
D)  neither a or b

Question 2

Which of the following will decrease the operating cycle?

Accepted Answer

A)  The cash cycle increases. 
B)  The days' sales in inventory decreases by three days but the average collection period increases by two days. 
C)  The average payment period increases. 
D)  All of these choices are correct. 
A)  The cash cycle increases. 
B)  The days' sales in inventory decreases by three days but the average collection period increases by two days. 
C)  The average payment period increases. 
D)  All of these choices are correct.

Question 3

If a firm has a cash cycle of 47 days and an operating cycle of 92 days, what is its average payment period?

Accepted Answer

A)  45 
B)  47 
C)  92 
D)  139 
A)  45 
B)  47 
C)  92 
D)  139

Question 4

Which of the following is NOT an example of an inventory loan?

Accepted Answer

A)  Blanket inventory liens 
B)  Trust receipts 
C)  Field warehousing financing 
D)  Inventory factor 
A)  Blanket inventory liens 
B)  Trust receipts 
C)  Field warehousing financing 
D)  Inventory factor

Question 5

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

Accepted Answer

A)  Banker's paper 
B)  Commercial paper 
C)  Banker's acceptance 
D)  Commercial acceptance 
A)  Banker's paper 
B)  Commercial paper 
C)  Banker's acceptance 
D)  Commercial acceptance

Question 6

If a firm has a cash cycle of 18 days and an operating cycle of 34 days, what is its payables turnover?

Accepted Answer

A)  16.00 
B)  20.28 
C)  22.81 
D)  34.00 
A)  16.00 
B)  20.28 
C)  22.81 
D)  34.00

Question 7

Joe's Burgers would like to maintain their cash account at a minimum level of $300,000, but expects the standard deviation in net daily cash flows to be $20,000; the effective annual rate on marketable securities to be 5.2 percent per year; and the trading cost per sale or purchase of marketable securities to be $22.50 per transaction. What will be their optimal upper cash limit?

Accepted Answer

A)  $320,000.00 
B)  $336,492.68 
C)  $409,478.04 
D)  $1,009,478.04 
A)  $320,000.00 
B)  $336,492.68 
C)  $409,478.04 
D)  $1,009,478.04

Question 8

Stellar Shoes would like to maintain their cash account at a minimum level of $25,000, but expects the standard deviation in net daily cash flows to be $2,000; the effective annual rate on marketable securities to be 5 percent per year; and the trading cost per sale or purchase of marketable securities to be $100 per transaction. What will be their optimal upper cash limit?

Accepted Answer

A)  $27,000 
B)  $38,092.34 
C)  $114,277.02 
D)  $64,277.02 
A)  $27,000 
B)  $38,092.34 
C)  $114,277.02 
D)  $64,277.02

Question 9

All of the following are examples of carrying costs EXCEPT

Accepted Answer

A)  rental payments on buildings where the business is located. 
B)  maintenance costs on the inventory. 
C)  the opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets. 
D)  All of these choices are correct. 
A)  rental payments on buildings where the business is located. 
B)  maintenance costs on the inventory. 
C)  the opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets. 
D)  All of these choices are correct.

Question 10

Which of the following is not a basic element of Kaizen?

Accepted Answer

A)  teamwork 
B)  personal discipline 
C)  improved moral 
D)  flexible work schedules 
A)  teamwork 
B)  personal discipline 
C)  improved moral 
D)  flexible work schedules

Question 11

If a firm has a cash cycle of 55 days and an operating cycle of 150 days, what is its payables turnover?

Accepted Answer

A)  9.50 
B)  6.64 
C)  3.84 
D)  2.60 
A)  9.50 
B)  6.64 
C)  3.84 
D)  2.60

Question 12

Which of the following statements regarding operating cycles are true?

Accepted Answer

A)  The firm's cash cycle is the portion of the operating cycle that the firm must finance. 
B)  Is the time required to acquire raw materials and to produce, sell, and receive payment for the finished goods. 
C)  The firm's cash cycle is the operating cycle minus the average payment period. 
D)  all of the above 
A)  The firm's cash cycle is the portion of the operating cycle that the firm must finance. 
B)  Is the time required to acquire raw materials and to produce, sell, and receive payment for the finished goods. 
C)  The firm's cash cycle is the operating cycle minus the average payment period. 
D)  all of the above

Question 13

Suppose that Mack Industries has annual sales of $10 million, cost of goods sold of $6.5 million, average inventories of $1 million, and average accounts receivable of $600,000. Assuming that all of Mack's sales are on credit, what will be the firm's operating cycle?

Accepted Answer

A)  34.25 
B)  21.9 
C)  56.15 
D)  78.05 
A)  34.25 
B)  21.9 
C)  56.15 
D)  78.05

Question 14

A firm wants to reduce its cash cycle. Which of the following actions will reduce its cash cycle?

Accepted Answer

A)  The firm reduces its Days' sales outstanding. 
B)  The firm increases its inventory. 
C)  The firm reduces its accounts payable. 
D)  All of these choices are correct. 
A)  The firm reduces its Days' sales outstanding. 
B)  The firm increases its inventory. 
C)  The firm reduces its accounts payable. 
D)  All of these choices are correct.

Question 15

Rose N More Resources faces a smooth annual demand for cash of $50 million, incurs transaction costs of $350 every time they sell marketable securities, and can earn 5.2 percent on their marketable securities. What will be their optimal cash replenishment level?

Accepted Answer

A)  $18,708.29 
B)  $187,082.87 
C)  $82,041.27 
D)  $820,412.65 
A)  $18,708.29 
B)  $187,082.87 
C)  $82,041.27 
D)  $820,412.65

Question 16

The optimal cash replenishment level will increase with all of the following changes EXCEPT

Accepted Answer

A)  the transaction cost decreases. 
B)  the annual demand for cash increases. 
C)  the interest rate decreases. 
D)  All of these choices are correct. 
A)  the transaction cost decreases. 
B)  the annual demand for cash increases. 
C)  the interest rate decreases. 
D)  All of these choices are correct.

Question 17

What effect does decreasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

Accepted Answer

A)  It will cause the cash return point to increase. 
B)  It will cause the cash return point to decrease. 
C)  It has no impact on the cash return point. 
D)  It will cause the cash return point to first decrease, then increase. 
A)  It will cause the cash return point to increase. 
B)  It will cause the cash return point to decrease. 
C)  It has no impact on the cash return point. 
D)  It will cause the cash return point to first decrease, then increase.

Question 18

Safety stock is referred to as the

Accepted Answer

A)  excess amounts of fixed assets kept on hand to meet unexpected shocks in demand. 
B)  excess amounts of accruals used to fund short-term demands for cash. 
C)  excess amounts of a current asset kept on hand to meet unexpected shocks in demand. 
D)  none of the options. 
A)  excess amounts of fixed assets kept on hand to meet unexpected shocks in demand. 
B)  excess amounts of accruals used to fund short-term demands for cash. 
C)  excess amounts of a current asset kept on hand to meet unexpected shocks in demand. 
D)  none of the options.

Question 19

Reese's Resources faces a smooth annual demand for cash of $15 million, incurs transaction costs of $125 every time they sell marketable securities, and can earn 4.5 percent on their marketable securities. What will be their optimal cash replenishment level?

Accepted Answer

A)  $28,867.51 
B)  $288,675.13 
C)  $61,237.24 
D)  $6,123.72 
A)  $28,867.51 
B)  $288,675.13 
C)  $61,237.24 
D)  $6,123.72

Question 20

Which of the following resemble checks, but differ in that they are payable by the firm issuing them rather than payable by a bank?

Accepted Answer

A)  Drafts 
B)  Concentration banking 
C)  Wire transfers 
D)  Zero-balance account 
A)  Drafts 
B)  Concentration banking 
C)  Wire transfers 
D)  Zero-balance account

Carrying costs are associated with having current assets and fall into which general category?

Which of the following will decrease the operating cycle?

If a firm has a cash cycle of 47 days and an operating cycle of 92 days, what is its average payment period?

Which of the following is NOT an example of an inventory loan?

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

If a firm has a cash cycle of 18 days and an operating cycle of 34 days, what is its payables turnover?

All of the following are examples of carrying costs EXCEPT

Which of the following is not a basic element of Kaizen?

If a firm has a cash cycle of 55 days and an operating cycle of 150 days, what is its payables turnover?

Which of the following statements regarding operating cycles are true?

Suppose that Mack Industries has annual sales of $10 million, cost of goods sold of $6.5 million, average inventories of $1 million, and average accounts receivable of $600,000. Assuming that all of Mack's sales are on credit, what will be the firm's operating cycle?

A firm wants to reduce its cash cycle. Which of the following actions will reduce its cash cycle?

Rose N More Resources faces a smooth annual demand for cash of $50 million, incurs transaction costs of $350 every time they sell marketable securities, and can earn 5.2 percent on their marketable securities. What will be their optimal cash replenishment level?

The optimal cash replenishment level will increase with all of the following changes EXCEPT

What effect does decreasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

Safety stock is referred to as the

Reese's Resources faces a smooth annual demand for cash of $15 million, incurs transaction costs of $125 every time they sell marketable securities, and can earn 4.5 percent on their marketable securities. What will be their optimal cash replenishment level?

Which of the following resemble checks, but differ in that they are payable by the firm issuing them rather than payable by a bank?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 14: Working Capital Management and Policies

Carrying costs are associated with having current assets and fall into which general category?

Which of the following will decrease the operating cycle?

If a firm has a cash cycle of 47 days and an operating cycle of 92 days, what is its average payment period?

Which of the following is NOT an example of an inventory loan?

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

If a firm has a cash cycle of 18 days and an operating cycle of 34 days, what is its payables turnover?

All of the following are examples of carrying costs EXCEPT

Which of the following is not a basic element of Kaizen?

If a firm has a cash cycle of 55 days and an operating cycle of 150 days, what is its payables turnover?

Which of the following statements regarding operating cycles are true?

Suppose that Mack Industries has annual sales of $10 million, cost of goods sold of $6.5 million, average inventories of $1 million, and average accounts receivable of $600,000. Assuming that all of Mack's sales are on credit, what will be the firm's operating cycle?

A firm wants to reduce its cash cycle. Which of the following actions will reduce its cash cycle?

Rose N More Resources faces a smooth annual demand for cash of $50 million, incurs transaction costs of $350 every time they sell marketable securities, and can earn 5.2 percent on their marketable securities. What will be their optimal cash replenishment level?

The optimal cash replenishment level will increase with all of the following changes EXCEPT

What effect does decreasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

Safety stock is referred to as the

Reese's Resources faces a smooth annual demand for cash of $15 million, incurs transaction costs of $125 every time they sell marketable securities, and can earn 4.5 percent on their marketable securities. What will be their optimal cash replenishment level?

Which of the following resemble checks, but differ in that they are payable by the firm issuing them rather than payable by a bank?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters