Question 1

How are checks that are deposited into a typical lockbox handled?

Accepted Answer

A) The checks are deposited into a local bank which then overnights one check for the entire amount to the firm. 
B) The checks are collected once a day, normally in the early morning, by a bank employee. 
C) The checks are posted to the customer's account prior to being deposited. 
D) The checks are collected throughout the day and immediately deposited into the firm's account. 
E) The checks are collected and sent overnight to the firm's main office for processing. 
A) The checks are deposited into a local bank which then overnights one check for the entire amount to the firm. 
B) The checks are collected once a day, normally in the early morning, by a bank employee. 
C) The checks are posted to the customer's account prior to being deposited. 
D) The checks are collected throughout the day and immediately deposited into the firm's account. 
E) The checks are collected and sent overnight to the firm's main office for processing.

Question 2

Spice it Up! writes 57 checks a day with an average amount of $289 each.These checks generally clear the bank in 2.7 days.In addition, the firm generally receives an average of $20,900 a day in checks that are deposited immediately.Deposited funds are available in an average of .5 days.What is the firm's net float?

Accepted Answer

A) Net disbursement float of $36,318 
B) Net disbursement float of $34,027.10 
C) Net disbursement float of $34,750.30 
D) Net collection float of $36,318 
E) Net collection float of $34,027.10 
A) Net disbursement float of $36,318 
B) Net disbursement float of $34,027.10 
C) Net disbursement float of $34,750.30 
D) Net collection float of $36,318 
E) Net collection float of $34,027.10

Question 3

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Accepted Answer

A) Cash budget 
B) 5 C's of credit 
C) Credit analysis 
D) Aging schedule 
E) Credit scoring report 
A) Cash budget 
B) 5 C's of credit 
C) Credit analysis 
D) Aging schedule 
E) Credit scoring report

Question 4

Which of these tends to create an unexpected increase in a firm's average collection period?

Accepted Answer

A) Increased credit sales 
B) The implementation of a cash discount 
C) Increased customer delinquencies 
D) Increased dollar value per each sale 
E) Increased collection efforts 
A) Increased credit sales 
B) The implementation of a cash discount 
C) Increased customer delinquencies 
D) Increased dollar value per each sale 
E) Increased collection efforts

Question 5

Which one of the 5 C's refers to the general economic climate in a customer's line of business?

Accepted Answer

A) Capital 
B) Conditions 
C) Capacity 
D) Character 
E) Collateral 
A) Capital 
B) Conditions 
C) Capacity 
D) Character 
E) Collateral

Question 6

A firm's float management policy is most apt to include which one of the following statements?

Accepted Answer

A) All invoices are to be paid the same day they are received. 
B) All outgoing checks are to be delivered by the fastest means possible. 
C) The depository bank needs to process all deposits in accordance with the Check Clearing Act for the 21st Century. 
D) Any check received is to be held until the customer's account has been updated to record the payment. 
E) Accounts payable processing should be given priority over accounts receivable processing. 
A) All invoices are to be paid the same day they are received. 
B) All outgoing checks are to be delivered by the fastest means possible. 
C) The depository bank needs to process all deposits in accordance with the Check Clearing Act for the 21st Century. 
D) Any check received is to be held until the customer's account has been updated to record the payment. 
E) Accounts payable processing should be given priority over accounts receivable processing.

Question 7

For which one of the following instruments does a bank guarantee payment by the buyer?

Accepted Answer

A) Money market preferred stock 
B) Commercial paper 
C) Banker's acceptance 
D) Invoice 
E) Time draft 
A) Money market preferred stock 
B) Commercial paper 
C) Banker's acceptance 
D) Invoice 
E) Time draft

Question 8

On any given day, Daisy's receives and deposits numerous checks worth an average combined total of $3,428.The funds from these checks are generally available in 1.6 days.Every day the firm mails out checks totaling $2,850 that generally take 1.9 days to clear the bank.What is the amount of the disbursement float if the opening bank balance was $945 with no outstanding items?

Accepted Answer

A) $5,388 
B) $5,505 
C) $4,560 
D) $5,415 
E) $5,700 
A) $5,388 
B) $5,505 
C) $4,560 
D) $5,415 
E) $5,700

Question 9

The economic order quantity (EOQ) is best defined as the:

Accepted Answer

A) minimum size of an order needed to qualify for free shipping. 
B) minimum amount that must be ordered to obtain the quantity discount. 
C) number of items that are sold on average each month. 
D) restocking quantity that minimizes the total cost of inventory. 
E) minimal amount of inventory that must be purchased to receive a cash discount. 
A) minimum size of an order needed to qualify for free shipping. 
B) minimum amount that must be ordered to obtain the quantity discount. 
C) number of items that are sold on average each month. 
D) restocking quantity that minimizes the total cost of inventory. 
E) minimal amount of inventory that must be purchased to receive a cash discount.

Question 10

The length of time a firm grants its customers to pay for their purchases is called the:

Accepted Answer

A) lockbox period. 
B) discount period. 
C) credit period. 
D) cash cycle. 
E) receivables turnover period. 
A) lockbox period. 
B) discount period. 
C) credit period. 
D) cash cycle. 
E) receivables turnover period.

Question 11

Lockboxes should be located:

Accepted Answer

A) in every town where a firm has a customer. 
B) geographically close to a firm's primary customers. 
C) only in major urban areas since those are the key financial areas of the country. 
D) close to a firm's home office. 
E) only in cities where the firm has regional offices. 
A) in every town where a firm has a customer. 
B) geographically close to a firm's primary customers. 
C) only in major urban areas since those are the key financial areas of the country. 
D) close to a firm's home office. 
E) only in cities where the firm has regional offices.

Question 12

Collection policy refers to the:

Accepted Answer

A) process of determining which customers will be granted credit. 
B) process of determining the probability that customers will not pay. 
C) set of guidelines used by a firm to determine the cost of offering credit to its customers. 
D) daily process of handling cash inflows and outflows of cash. 
E) set of procedures a firm follows in collecting accounts receivable. 
A) process of determining which customers will be granted credit. 
B) process of determining the probability that customers will not pay. 
C) set of guidelines used by a firm to determine the cost of offering credit to its customers. 
D) daily process of handling cash inflows and outflows of cash. 
E) set of procedures a firm follows in collecting accounts receivable.

Question 13

Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Accepted Answer

A) 38 carpets 
B) 66 carpets 
C) 47 carpets 
D) 51 carpets 
E) 72 carpets 
A) 38 carpets 
B) 66 carpets 
C) 47 carpets 
D) 51 carpets 
E) 72 carpets

Question 14

Westpond's has an average collection period of 36 days.Its average daily investment in accounts receivables is $62,456.What are its annual credit sales? Assume a 365-day year.

Accepted Answer

A) $759,881 
B) $633,234 
C) $735,369 
D) $725,295 
E) $749,472 
A) $759,881 
B) $633,234 
C) $735,369 
D) $725,295 
E) $749,472

Question 15

Which statement is correct?

Accepted Answer

A) Firms cannot use lockboxes if they use cash concentration accounts. 
B) Firms prefer to increase processing delay on disbursements. 
C) Firms prefer to eliminate all types of float. 
D) Firms open regional offices so their employees can pick up lockbox payments throughout the day. 
E) The Check Clearing Act for the 21st Century is designed to reduce total collection time to one day. 
A) Firms cannot use lockboxes if they use cash concentration accounts. 
B) Firms prefer to increase processing delay on disbursements. 
C) Firms prefer to eliminate all types of float. 
D) Firms open regional offices so their employees can pick up lockbox payments throughout the day. 
E) The Check Clearing Act for the 21st Century is designed to reduce total collection time to one day.

Question 16

Which of these represents a transaction motive for holding cash?

Accepted Answer

A) Buying extra inventory in response to an unexpected sale offered by a supplier 
B) Distributing the weekly paychecks 
C) Increasing the minimum cash balance for the firm's main bank account 
D) Unexpectedly purchasing a competitor's firm 
E) Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep rising 
A) Buying extra inventory in response to an unexpected sale offered by a supplier 
B) Distributing the weekly paychecks 
C) Increasing the minimum cash balance for the firm's main bank account 
D) Unexpectedly purchasing a competitor's firm 
E) Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep rising

Question 17

KL Textiles writes 22 checks a day for an average amount of $827 each.These checks generally clear the bank 3.5 days after they are written.In addition, the firm generally receives an average of $23,902 a day in checks.Deposited amounts are available after one day.What is the amount of the firm's disbursement float?

Accepted Answer

A) $11,951 
B) $23,902 
C) $39,777 
D) $29,840 
E) $63,679 
A) $11,951 
B) $23,902 
C) $39,777 
D) $29,840 
E) $63,679

Question 18

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Accepted Answer

A) Extended EOQ 
B) Just-in-time 
C) ABC approach 
D) Materials requirements planning 
E) Economic order quantity 
A) Extended EOQ 
B) Just-in-time 
C) ABC approach 
D) Materials requirements planning 
E) Economic order quantity

Question 19

Electronics and More offers credit terms of 2/7, net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Accepted Answer

A) 41.83 percent 
B) 38.59 percent 
C) 44.99 percent 
D) 37.80 percent 
E) 32.58 percent 
A) 41.83 percent 
B) 38.59 percent 
C) 44.99 percent 
D) 37.80 percent 
E) 32.58 percent

Question 20

As of Monday morning, the ledger balance and the available balance for a firm was $3,000.During the day, the firm wrote three checks in the amounts of $750, $225, and $452.The firm deposited a check for $560 and a check for $258.What is the amount of the collection float as of the end of the day assuming none of these checks have cleared?

Accepted Answer

A) $755 
B) $1,427 
C) $609 
D) $818 
E) $2,245 
A) $755 
B) $1,427 
C) $609 
D) $818 
E) $2,245

How are checks that are deposited into a typical lockbox handled?

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Which of these tends to create an unexpected increase in a firm's average collection period?

Which one of the 5 C's refers to the general economic climate in a customer's line of business?

A firm's float management policy is most apt to include which one of the following statements?

For which one of the following instruments does a bank guarantee payment by the buyer?

The economic order quantity (EOQ) is best defined as the:

The length of time a firm grants its customers to pay for their purchases is called the:

Lockboxes should be located:

Collection policy refers to the:

Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Westpond's has an average collection period of 36 days.Its average daily investment in accounts receivables is $62,456.What are its annual credit sales? Assume a 365-day year.

Which statement is correct?

Which of these represents a transaction motive for holding cash?

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Electronics and More offers credit terms of 2/7, net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

International Aspects of Financial Management

Filters

Exam 17: Working Capital Management

How are checks that are deposited into a typical lockbox handled?

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Which of these tends to create an unexpected increase in a firm's average collection period?

Which one of the 5 C's refers to the general economic climate in a customer's line of business?

A firm's float management policy is most apt to include which one of the following statements?

For which one of the following instruments does a bank guarantee payment by the buyer?

The economic order quantity (EOQ) is best defined as the:

The length of time a firm grants its customers to pay for their purchases is called the:

Lockboxes should be located:

Collection policy refers to the:

Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Westpond's has an average collection period of 36 days.Its average daily investment in accounts receivables is $62,456.What are its annual credit sales? Assume a 365-day year.

Which statement is correct?

Which of these represents a transaction motive for holding cash?

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Electronics and More offers credit terms of 2/7, net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

International Aspects of Financial Management

Filters