Brothers Breads has the following data.What is the firm's cash conversion cycle? $\begin{array}{ll} \text { Inventory conversion period }= & 50 \text { days } \\ \text { Average collection period }= & 17 \text { days } \\ \text { Payables deferral period }= & 25 \text { days } \end{array}$

A) 31 days B) 34 days C) 38 days D) 42 days E) 46 days A) 31 days B) 34 days C) 38 days D) 42 days E) 46 days

Frosty Corporation has the following data, in thousands.Assuming a 365-day year, what is the firm's cash conversion cycle? $\begin{array}{lr} \text { Annual sales }= & \$ 45,000 \\ \text { Annual cost of goods sold = } & \$ 31,500 \\ \text { Inventory }= & \$ 4,000 \\ \text { Accounts receivable }= & \$ 2,000 \\ \text { Accounts payable }= & \$ 2,400 \end{array}$

A) 25 days B) 28 days C) 31 days D) 35 days E) 38 days A) 25 days B) 28 days C) 31 days D) 35 days E) 38 days

Exam 16: Supply Chains and Working Capital Management

Baltimore Baking is preparing its cash budget and expects to have sales of $30,000 in January, $35,000 in February, and $35,000 in March.If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, what are the expected cash receipts for March?

(Multiple Choice)

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(77)

Question 101

Shorter-term cash budgets⎯say a daily cash budget for the next month⎯are generally used for actual cash control while longer-term cash budgets⎯say monthly cash budgets for the next year⎯are generally used for planning purposes.

(True/False)

4.9/5

(80)

Question 102

Freeman Builders, Inc.buys on terms of 2/15, net 30.It does not take discounts, and it typically pays 60 days after the invoice date.Net purchases amount to $720,000 per year.What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

(Multiple Choice)

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(90)

Question 103

The calculated cost of trade credit can be reduced by paying late.

(True/False)

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(74)

Question 104

The company you just started has been offered credit terms of 4/30, net 90 days.What will be the nominal annual percentage cost of its non-free trade credit if it pays 120 days after the purchase? (Assume a 365-day year.)

(Multiple Choice)

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Question 105

An increase in any current asset must be accompanied by an equal increase in some current liability.

(True/False)

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Question 106

Fairweather Corporation purchases merchandise on terms of 2/15, net 40, and its gross purchases (i.e., purchases before taking off the discount) are $800,000 per year.What is the maximum dollar amount of costly trade credit the firm could get, assuming it abides by the supplier's credit terms? (Assume a 365-day year.)

(Multiple Choice)

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Question 107

Which of the following statements is NOT CORRECT?

(Multiple Choice)

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Question 108

If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period.

(True/False)

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Question 109

Changes in a firm's collection policy can affect sales, working capital, and profits.

(True/False)

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Question 110

Safety Window and Door Co.buys on terms of 2/15, net 60 days.It does not take discounts, and it typically pays on time, 60 days after the invoice date.Net purchases amount to $450,000 per year.On average, how much "free" trade credit does the firm receive during the year? (Assume a 365-day year, and note that purchases are net of discounts.)

(Multiple Choice)

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Question 111

If a profitable firm finds that it simply must "stretch" its accounts payable, then this suggests that it is undercapitalized, i.e., that it needs more working capital to support its operations.

(True/False)

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(83)

Question 112

Data on Liu Inc.for the most recent year are shown below, along with the inventory conversion period (ICP) of the firms against which it benchmarks.The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to the benchmarks' average.If this were done, by how much would inventories decline? Use a 365-day year. Cost of goods sold = \ 85,000 Inventory = \ 20,000 Inventory conversion period (ICP) = 85.88 Benchmark inventory conversion period (ICP) = 38.00

(Multiple Choice)

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(84)

Question 113

Taylor Textbooks Inc.buys on terms of 2/15, net 50 days.It does not take discounts, and it typically pays on time, 50 days after the invoice date.Net purchases amount to $450,000 per year.On average, what is the dollar amount of costly trade credit (total credit − free credit) the firm receives during the year? (Assume a 365-day year, and note that purchases are net of discounts.)

(Multiple Choice)

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Question 114

The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the average collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital.Other things held constant, the shorter the CCC, the more effective the firm's working capital management.

(True/False)

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Question 115

If a firm takes actions that reduce its days sales outstanding (DSO), then, other things held constant, this will lengthen its cash conversion cycle (CCC).

(True/False)

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Question 116

Brothers Breads has the following data.What is the firm's cash conversion cycle? Inventory conversion period = 50 days Average collection period = 17 days Payables deferral period = 25 days

(Multiple Choice)

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Question 117

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 118

Frosty Corporation has the following data, in thousands.Assuming a 365-day year, what is the firm's cash conversion cycle? Annual sales = \ 45,000 Annual cost of goods sold = \ 31,500 Inventory = \ 4,000 Accounts receivable = \ 2,000 Accounts payable = \ 2,400

(Multiple Choice)

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(74)

Question 119

Other things held constant, if a firm "stretches" (i.e., delays paying) its accounts payable, this will lengthen its cash conversion cycle (CCC).

(True/False)

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(72)

Question 120

Showing 101 - 120 of 131

Exam 16: Supply Chains and Working Capital Management

Shorter-term cash budgets⎯say a daily cash budget for the next month⎯are generally used for actual cash control while longer-term cash budgets⎯say monthly cash budgets for the next year⎯are generally used for planning purposes.

Freeman Builders, Inc.buys on terms of 2/15, net 30.It does not take discounts, and it typically pays 60 days after the invoice date.Net purchases amount to $720,000 per year.What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

The calculated cost of trade credit can be reduced by paying late.

The company you just started has been offered credit terms of 4/30, net 90 days.What will be the nominal annual percentage cost of its non-free trade credit if it pays 120 days after the purchase? (Assume a 365-day year.)

An increase in any current asset must be accompanied by an equal increase in some current liability.

Which of the following statements is NOT CORRECT?

If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period.

Changes in a firm's collection policy can affect sales, working capital, and profits.

If a profitable firm finds that it simply must "stretch" its accounts payable, then this suggests that it is undercapitalized, i.e., that it needs more working capital to support its operations.

If a firm takes actions that reduce its days sales outstanding (DSO), then, other things held constant, this will lengthen its cash conversion cycle (CCC).

Brothers Breads has the following data.What is the firm's cash conversion cycle? Inventory conversion period = 50 days Average collection period = 17 days Payables deferral period = 25 days

Which of the following statements is CORRECT?

Frosty Corporation has the following data, in thousands.Assuming a 365-day year, what is the firm's cash conversion cycle? Annual sales = \ 45,000 Annual cost of goods sold = \ 31,500 Inventory = \ 4,000 Accounts receivable = \ 2,000 Accounts payable = \ 2,400

Other things held constant, if a firm "stretches" (i.e., delays paying) its accounts payable, this will lengthen its cash conversion cycle (CCC).

An Overview of Financial Management and the Financial Environment

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Bonds, Bond Valuation, and Interest Rates

Risk and Return

Corporate Valuation and Stock Valuation

Financial Options and Applications in Corporate Finance

The Cost of Capital

The Basics of Capital Budgeting: Evaluating Cash Flows

Cash Flow Estimation and Risk Analysis

Corporate Valuation and Financial Planning

Corporate Governance

Distributions to Shareholders: Dividends and Repurchases

Capital Structure Decisions

Multinational Financial Management

Public and Private Financing: Initial Offerings, Seasoned Offerings, and Investment Banks

Lease Financing

Hybrid Financing: Preferred Stock, Warrants, and Convertibles

Dynamic Capital Structures and Corporate Valuation

Mergers and Corporate Control

Enterprise Risk Management

Bankruptcy, Reorganization, and Liquidation

Portfolio Theory and Asset Pricing Models

Real Options

Providing and Obtaining Credit

Advanced Issues in Cash Management and Inventory Control

Pension Plan Management

Financial Management in Not-For-Profit Businesses

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