Question 1

The size of the accounts payable is affected by the level of the firm's cost of goods sold and the average payment period.

Accepted Answer

A) True 
 B)False

Question 2

BP has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Based on this information, BPs operating cycle is ________ days.

Accepted Answer

A)  95 
B)  85 
C)  75 
D)  65 
A)  95 
B)  85 
C)  75 
D)  65

Question 3

These are short-term money market investments that are extremely safe and liquid; they can be quickly converted into cash at values very close to their intrinsic values.

Accepted Answer

A)  preferred stocks. 
B)  treasury bonds. 
C)  corporate bonds. 
D)  marketable securities. 
A)  preferred stocks. 
B)  treasury bonds. 
C)  corporate bonds. 
D)  marketable securities.

Question 4

With regards to credit analysis, this reflects whether assets are available to provide security for the potential credit.

Accepted Answer

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

Question 5

The time between ordering materials and collecting cash from receivables is known as the:

Accepted Answer

A)  operating cycle 
B)  cash conversion cycle 
C)  accounts receivable period 
D)  term payable cycle 
A)  operating cycle 
B)  cash conversion cycle 
C)  accounts receivable period 
D)  term payable cycle

Question 6

An account in which just enough funds are transferred to cover that day's checks presented for payment is called a daily account.

Accepted Answer

A) True 
 B)False

Question 7

The time between when the firm pays its suppliers and when it collects money from its customers is known as the:

Accepted Answer

A)  operating cycle 
B)  cash conversion cycle 
C)  accounts receivable period 
D)  clearing cycle 
A)  operating cycle 
B)  cash conversion cycle 
C)  accounts receivable period 
D)  clearing cycle

Question 8

With regards to credit analysis, this refers to the ethical quality of the applicant on which one can base a judgment about his or her willingness to pay bills.

Accepted Answer

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

Question 9

BP has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days. Based on this information, BPs average age of inventory is ________ days.

Accepted Answer

A)  80 
B)  50 
C)  90 
D)  70 
A)  80 
B)  50 
C)  90 
D)  70

Question 10

Deposits placed in foreign banks that remain denominated in U.S. dollars are called:

Accepted Answer

A)  bankers' acceptances 
B)  Eurodollars 
C)  federal funds 
D)  commercial paper 
A)  bankers' acceptances 
B)  Eurodollars 
C)  federal funds 
D)  commercial paper

Question 11

Ithaca Iron has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for negotiated financing and reduces its cash conversion cycle to 50 days, the annual savings is closest to

Accepted Answer

A)  $60,000. 
B)  $10,000. 
C)  $6,000. 
D)  $16,000. 
A)  $60,000. 
B)  $10,000. 
C)  $6,000. 
D)  $16,000.

Question 12

Calculation of a firm's average collection period is the same as calculating the:

Accepted Answer

A)  accounts receivable cycle 
B)  inventory cycle 
C)  accounts payable cycle 
D)  cash cycle 
A)  accounts receivable cycle 
B)  inventory cycle 
C)  accounts payable cycle 
D)  cash cycle

Question 13

The cash conversion cycle measures a firm's financing gap in terms of time.

Accepted Answer

A) True 
 B)False

Question 14

Reasons to invest in marketable securities would not include:

Accepted Answer

A)  transactions motives 
B)  precautionary motives 
C)  speculative motives 
D)  all the above are reasons to invest in marketable securities 
A)  transactions motives 
B)  precautionary motives 
C)  speculative motives 
D)  all the above are reasons to invest in marketable securities

Question 15

If the average payment period is longer, then the cash conversion cycle will be longer.

Accepted Answer

A) True 
 B)False

Question 16

A firm with an inventory period of 100 days and an accounts payable period of 50 days will have an operating cycle of 150 days.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is most correct?

Accepted Answer

A)  Eurodollars are deposits placed in U.S. banks that remain denominated in foreign currencies. 
B)  Treasury bills are rarely traded in secondary money markets. 
C)  The most common trading unit for federal funds is $1 million. 
D)  Federal funds are used most often by firms to finance inventories. 
A)  Eurodollars are deposits placed in U.S. banks that remain denominated in foreign currencies. 
B)  Treasury bills are rarely traded in secondary money markets. 
C)  The most common trading unit for federal funds is $1 million. 
D)  Federal funds are used most often by firms to finance inventories.

Question 18

Which of the following cycles is not a component of the firm's operating cycle?

Accepted Answer

A)  inventory cycle 
B)  accounts receivable cycle 
C)  accounts payable cycle 
D)  fixed asset cycle 
A)  inventory cycle 
B)  accounts receivable cycle 
C)  accounts payable cycle 
D)  fixed asset cycle

Question 19

Cash conversion cycle = Operating cycle - Average payment period.

Accepted Answer

A) True 
 B)False

Question 20

Accounts payable = Cost of goods sold per day × Average payment period.

Accepted Answer

A) True 
 B)False

The size of the accounts payable is affected by the level of the firm's cost of goods sold and the average payment period.

BP has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Based on this information, BPs operating cycle is ________ days.

These are short-term money market investments that are extremely safe and liquid; they can be quickly converted into cash at values very close to their intrinsic values.

With regards to credit analysis, this reflects whether assets are available to provide security for the potential credit.

The time between ordering materials and collecting cash from receivables is known as the:

An account in which just enough funds are transferred to cover that day's checks presented for payment is called a daily account.

The time between when the firm pays its suppliers and when it collects money from its customers is known as the:

With regards to credit analysis, this refers to the ethical quality of the applicant on which one can base a judgment about his or her willingness to pay bills.

BP has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days. Based on this information, BPs average age of inventory is ________ days.

Deposits placed in foreign banks that remain denominated in U.S. dollars are called:

Ithaca Iron has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for negotiated financing and reduces its cash conversion cycle to 50 days, the annual savings is closest to

Calculation of a firm's average collection period is the same as calculating the:

The cash conversion cycle measures a firm's financing gap in terms of time.

Reasons to invest in marketable securities would not include:

If the average payment period is longer, then the cash conversion cycle will be longer.

A firm with an inventory period of 100 days and an accounts payable period of 50 days will have an operating cycle of 150 days.

Which of the following statements is most correct?

Which of the following cycles is not a component of the firm's operating cycle?

Cash conversion cycle = Operating cycle - Average payment period.

Accounts payable = Cost of goods sold per day × Average payment period.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 15: Managing Working Capital

The size of the accounts payable is affected by the level of the firm's cost of goods sold and the average payment period.

BP has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Based on this information, BPs operating cycle is ________ days.

These are short-term money market investments that are extremely safe and liquid; they can be quickly converted into cash at values very close to their intrinsic values.

With regards to credit analysis, this reflects whether assets are available to provide security for the potential credit.

The time between ordering materials and collecting cash from receivables is known as the:

An account in which just enough funds are transferred to cover that day's checks presented for payment is called a daily account.

The time between when the firm pays its suppliers and when it collects money from its customers is known as the:

With regards to credit analysis, this refers to the ethical quality of the applicant on which one can base a judgment about his or her willingness to pay bills.

BP has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days. Based on this information, BPs average age of inventory is ________ days.

Deposits placed in foreign banks that remain denominated in U.S. dollars are called:

Ithaca Iron has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for negotiated financing and reduces its cash conversion cycle to 50 days, the annual savings is closest to

Calculation of a firm's average collection period is the same as calculating the:

The cash conversion cycle measures a firm's financing gap in terms of time.

Reasons to invest in marketable securities would not include:

If the average payment period is longer, then the cash conversion cycle will be longer.

A firm with an inventory period of 100 days and an accounts payable period of 50 days will have an operating cycle of 150 days.

Which of the following statements is most correct?

Which of the following cycles is not a component of the firm's operating cycle?

Cash conversion cycle = Operating cycle - Average payment period.

Accounts payable = Cost of goods sold per day × Average payment period.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters