Question 1

The level of investment in accounts receivable depends on:

Accepted Answer

A)  credit analysis 
B)  accounts payable terms 
C)  number of customers 
D)  average sale prices 
A)  credit analysis 
B)  accounts payable terms 
C)  number of customers 
D)  average sale prices

Question 2

The transaction motive for holding cash is the demand for cash needed to take advantage of unusual cash discounts for needed materials.

Accepted Answer

A) True 
 B)False

Question 3

In cash budgeting, the ________ seasonal and uncertain a firm's cash flows, the ________ the number of budgeting intervals it should use

Accepted Answer

A)  more; greater 
B)  more; fewer 
C)  less; greater 
D)  less; fewer 
A)  more; greater 
B)  more; fewer 
C)  less; greater 
D)  less; fewer

Question 4

The operating cycle measures the time it takes between ordering materials and collecting cash from receivables.

Accepted Answer

A) True 
 B)False

Question 5

A negative cash conversion cycle indicates that the…

Accepted Answer

A)  operating cycle exceeds the average payment period. 
B)  average payment period exceeds the operating cycle. 
C)  firm is shortening its average payment period and lengthening its average collection period. 
D)  lengthening its average collection period and lengthening its inventory period. 
A)  operating cycle exceeds the average payment period. 
B)  average payment period exceeds the operating cycle. 
C)  firm is shortening its average payment period and lengthening its average collection period. 
D)  lengthening its average collection period and lengthening its inventory period.

Question 6

One item that does not affect the cash conversion cycle is:

Accepted Answer

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

Question 7

All businesses can earn interest at the prime rate on funds in their checking accounts.

Accepted Answer

A) True 
 B)False

Question 8

Accounts payable / (COGS / 365).

Accepted Answer

A)  Inventory conversion period 
B)  Average collection period 
C)  Average payment period 
D)  Inventory turnover 
A)  Inventory conversion period 
B)  Average collection period 
C)  Average payment period 
D)  Inventory turnover

Question 9

BP has an operating cycle of 150 days, an average collection period of 40 days, and an average payment period of 20 days. Based on this information, BPs average age of inventory is ________ days.

Accepted Answer

A)  130 
B)  60 
C)  90 
D)  110 
A)  130 
B)  60 
C)  90 
D)  110

Question 10

Firms may not sell marketable securities to cover cash shortfalls.

Accepted Answer

A) True 
 B)False

Question 11

Receivables investment amount = Net sales per day × Average collection period.

Accepted Answer

A) True 
 B)False

Question 12

If a firm has an operating cycle of 120 days and an average payment period of 20 days, its cash conversion cycle would be:

Accepted Answer

A)  100 days 
B)  140 days 
C)  18 days 
D)  160 days 
A)  100 days 
B)  140 days 
C)  18 days 
D)  160 days

Question 13

A financial manager should strive to maximize the investment in current assets.

Accepted Answer

A) True 
 B)False

Question 14

Examples of regular cash outflows would not include:

Accepted Answer

A)  materials purchases 
B)  rent 
C)  utility bills 
D)  fixed asset purchases 
A)  materials purchases 
B)  rent 
C)  utility bills 
D)  fixed asset purchases

Question 15

Ningbo shipping has projected sales in May, June, and July of $100, $200, and $300, respectively. It makes 20 percent of sales for cash and collects the balance one month following the sale. Ningbo Shipping's total cash receipts in July are

Accepted Answer

A)  $220 
B)  $200 
C)  $180 
D)  $100 
A)  $220 
B)  $200 
C)  $180 
D)  $100

Question 16

All of the following statements is correct except

Accepted Answer

A)  The financial crisis and recession of 2007-2009 had strong effects on the ability of borrower firms to obtain short-term financing and for firms with surplus funds to invest in short-term instruments. 
B)  During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate major stresses to the financial system-both for issuers and investors. 
C)  During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (commercial paper) and placing funds in the safest assets (T-Bills). 
D)  During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (T-Bills) and placing funds in the safest assets (corporate bonds). 
A)  The financial crisis and recession of 2007-2009 had strong effects on the ability of borrower firms to obtain short-term financing and for firms with surplus funds to invest in short-term instruments. 
B)  During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate major stresses to the financial system-both for issuers and investors. 
C)  During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (commercial paper) and placing funds in the safest assets (T-Bills). 
D)  During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (T-Bills) and placing funds in the safest assets (corporate bonds).

Question 17

Most firms have a minimum desired cash balance.

Accepted Answer

A) True 
 B)False

Question 18

Cash disbursements may include which of the following?

Accepted Answer

A)  cash sales 
B)  collection of accounts receivable 
C)  inventory financing 
D)  fixed asset outlays 
A)  cash sales 
B)  collection of accounts receivable 
C)  inventory financing 
D)  fixed asset outlays

Question 19

In June, Erie Plastics had an ending cash balance of $55,000. In July, the firm had total cash receipts of $70,000 and total cash disbursements of $10,000. The minimum cash balance required by the firm is $25,000. At the end of July, Erie Plastics had

Accepted Answer

A)  an excess cash balance of $90,000 
B)  an excess cash balance of $0 
C)  an excess cash balance of $115,000 
D)  required financing of $25,000 
A)  an excess cash balance of $90,000 
B)  an excess cash balance of $0 
C)  an excess cash balance of $115,000 
D)  required financing of $25,000

Question 20

A cash budget is a tool the treasurer uses to forecast future cash flows and estimate future short-term borrowing needs.

Accepted Answer

A) True 
 B)False

The level of investment in accounts receivable depends on:

The transaction motive for holding cash is the demand for cash needed to take advantage of unusual cash discounts for needed materials.

In cash budgeting, the seasonal and uncertain a firm's cash flows, the the number of budgeting intervals it should use

The operating cycle measures the time it takes between ordering materials and collecting cash from receivables.

A negative cash conversion cycle indicates that the…

One item that does not affect the cash conversion cycle is:

All businesses can earn interest at the prime rate on funds in their checking accounts.

Accounts payable / (COGS / 365).

BP has an operating cycle of 150 days, an average collection period of 40 days, and an average payment period of 20 days. Based on this information, BPs average age of inventory is ________ days.

Firms may not sell marketable securities to cover cash shortfalls.

Receivables investment amount = Net sales per day × Average collection period.

If a firm has an operating cycle of 120 days and an average payment period of 20 days, its cash conversion cycle would be:

A financial manager should strive to maximize the investment in current assets.

Examples of regular cash outflows would not include:

Ningbo shipping has projected sales in May, June, and July of $100, $200, and $300, respectively. It makes 20 percent of sales for cash and collects the balance one month following the sale. Ningbo Shipping's total cash receipts in July are

All of the following statements is correct except

Most firms have a minimum desired cash balance.

Cash disbursements may include which of the following?

In June, Erie Plastics had an ending cash balance of $55,000. In July, the firm had total cash receipts of $70,000 and total cash disbursements of $10,000. The minimum cash balance required by the firm is $25,000. At the end of July, Erie Plastics had

A cash budget is a tool the treasurer uses to forecast future cash flows and estimate future short-term borrowing needs.

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

Exam 15: Managing Working Capital

The level of investment in accounts receivable depends on:

The transaction motive for holding cash is the demand for cash needed to take advantage of unusual cash discounts for needed materials.

In cash budgeting, the ________ seasonal and uncertain a firm's cash flows, the ________ the number of budgeting intervals it should use

The operating cycle measures the time it takes between ordering materials and collecting cash from receivables.

A negative cash conversion cycle indicates that the…

One item that does not affect the cash conversion cycle is:

All businesses can earn interest at the prime rate on funds in their checking accounts.

Accounts payable / (COGS / 365).

BP has an operating cycle of 150 days, an average collection period of 40 days, and an average payment period of 20 days. Based on this information, BPs average age of inventory is ________ days.

Firms may not sell marketable securities to cover cash shortfalls.

Receivables investment amount = Net sales per day × Average collection period.

If a firm has an operating cycle of 120 days and an average payment period of 20 days, its cash conversion cycle would be:

A financial manager should strive to maximize the investment in current assets.

Examples of regular cash outflows would not include:

Ningbo shipping has projected sales in May, June, and July of $100, $200, and $300, respectively. It makes 20 percent of sales for cash and collects the balance one month following the sale. Ningbo Shipping's total cash receipts in July are

All of the following statements is correct except

Most firms have a minimum desired cash balance.

Cash disbursements may include which of the following?

In June, Erie Plastics had an ending cash balance of $55,000. In July, the firm had total cash receipts of $70,000 and total cash disbursements of $10,000. The minimum cash balance required by the firm is $25,000. At the end of July, Erie Plastics had

A cash budget is a tool the treasurer uses to forecast future cash flows and estimate future short-term borrowing needs.

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

In cash budgeting, the seasonal and uncertain a firm's cash flows, the the number of budgeting intervals it should use