Exam 16: Short-Term Financial Planning

The Lumber Yard has projected sales for April through July of $152,400, $161,800, $189,700, and $196,400, respectively.The firm collects 52 percent of its sales in the month of sale, 46 percent in the month following the month of sale, and the remainder in the second month following the month of sale.What is the amount of the July collections?

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will? I.Uncollectable accounts receivable II.Work stoppages for lack of raw materials III.Carrying costs IV.Obsolete or out-of-date inventory

An increase in the accounts receivable period is most apt to:

Kurt's Music has a line of credit with a local bank that permits it to borrow up to $650,000 at any time.The interest rate is .64 percent per month.The bank charges compound interest and also requires that 2 percent of the amount borrowed be deposited into a non-interest-bearing account.How much interest will the firm pay if it needs $200,000 of cash for three months to pay its operating expenses?

The High Water Mark is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Corner Store Industries has annual sales of $662,070 and cost of goods sold of $494,160.The profit margin is 4.4 percent and the accounts payable period is 29 days.What is the average accounts payable balance?

A company has the following account balances.Which statement is correct concerning these balances?

The accounts receivable turnover rate for Tough Pants Clothing has gone from an average of 12.6 times to 14.1 times per year.How has this change affected the firm's accounts receivable period?

Which of the following are inversely related to increases in a firm's current assets? I.Reorder costs II.Shortage costs III.Restocking costs IV.Carrying costs

Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Dover Wholesalers sells products exclusively to Benn Retailer.Benn Retailer buys exclusively from Dover Wholesalers.Dover Wholesalers has a receivables period of 44 days, an inventory period of 8 days, and a payables period of 63 days.Benn Retailer has an inventory period of 15 days, a receivables period of 22 days, and a payables period of 44 days.Which statement is correct given this information?

Which one of the following will increase the operating cycle?

Which statement is true?

Kelso's has projected sales for January through April of $136,000, $148,000, $144,000, and $146,000, respectively.The firm collects 59 percent of sales in the month of sale, 36 percent in the month following the sale, and the remainder in the second month following the sale.Assume all sales are collected.The accounts receivable balance at the end of the beginning of January was $56,050 ($47,643 of which was uncollected December sales).How much did the firm collect in the month of February?

French Vertical Systems has sales for the year of $425,860, cost of goods sold equal to 64 percent of sales, and an average inventory of $53,600.The profit margin is 6 percent and the tax rate is 21 percent.How many days on average does it take the firm to sell an inventory item?

QT Stores has an average collection period of 28 days and factors all of its receivables immediately at a discount of 1.12 percent.What is the firm's effective cost of borrowing assuming all accounts are collected in full?

Which statement is true?

The Grain and Feed Store purchases are equal to 68 percent of the following quarter's sales.The accounts receivable period is 15 days and the accounts payable period is 30 days.Assume there are 30 days in each month.The store has estimated quarterly sales for the next year, starting with Quarter 1, of $16,750, $18,220, $17,560, and $19,710, respectively.How much will the store owe its suppliers at the end of Quarter 3?

Which of these activities is a source of cash?

Kitchen and Laundry and More has annual credit sales of $2,473,701 and cost of goods sold of $1,838,207.The average accounts receivable balance is $56,736.How many days on average does it take the firm to collect its accounts receivable?