Exam 18: Short Term Finance and Planning

Tall Guys Clothing has a 30-day collection period. Sales for the next calendar year are estimated at $1,950, $2,100, $2,650 and $3,200, respectively, by quarter, starting with the first quarter of the year. Given this information, which one of the following statements is correct? Assume a year has 360 days.

Which one of the following statements is correct?

Marci's has an average collection period of 34 days. Current practice is to factor all receivables immediately at a discount rate of 1.8 percent. Assume that default is extremely unlikely. What is the effective cost of borrowing?

Money deposited by a borrower with a bank in a low or non-interest-bearing account as a condition of a loan agreement is called a:

Which one of the following actions will increase net working capital? Assume the current ratio is greater than 1.0.

Which one of the following combinations is most apt to cause a company that is generally financially sound to have a negative net cash inflow for a particular quarter?

Central Supply paid off an accounts payable for a toboggan it had purchased on credit three weeks ago. The time period between today and the day Central Supply will receive cash from the sale of this toboggan is called the:

The Sports Store has a $230,000 line of credit that requires 1.5 percent of the unused portion of the credit line be deposited in a non-interest-bearing account as a compensating balance. The interest rate on the borrowed funds is 2.05 percent per quarter. The Sports Store's short-term investments are paying 1.5 percent per quarter. What is the effective annual interest rate on the line of credit if the entire credit line is borrowed for one year? Assume any funds borrowed or invested use compound interest.

Which one of the following statements is correct concerning the cash cycle?