A) used to identify inventory safety stocks. B) used to slow down the collection of checks our firm writes. C) used to speed up the collection of checks received. D) used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks. E) used to protect cash, i.e., to keep it from being stolen. A) used to identify inventory safety stocks. B) used to slow down the collection of checks our firm writes. C) used to speed up the collection of checks received. D) used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks. E) used to protect cash, i.e., to keep it from being stolen.

Shulman Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle? \[\begin{array} { l l } \text { Angual sales } = & \$ 45,000 \\ \text { Annual cost of goads sold } = & \$ 30,000 \\ \text { Inventory } = & \$ 4,500 \\ \text { Accaunts recervable } = & \$ 1,800 \\ \text { Accaunts payable } = & 2,500 \end{array}\]

A) 28 days B) 32 days C) 35 days D) 39 days E) 43 days A) 28 days B) 32 days C) 35 days D) 39 days E) 43 days

Exam 16: Supply Chains and Working Capital Management

The calculated cost of trade credit for a firm that buys on terms of 2/10 net 30 is lower (other things held constant)if the firm plans to pay in 40 days than in 30 days.

(True/False)

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Question 101

Uncertainty about the exact lives of assets prevents precise maturity matching in an ex post (i.e.,after the fact)sense even though it is possible to match maturities on an ex ante (expected)basis.

(True/False)

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Question 102

A lockbox plan is

(Multiple Choice)

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Question 103

A firm constructing a new manufacturing plant and financing it with short-term loans,which are scheduled to be converted to first mortgage bonds when the plant is completed,would want to separate the construction loan from its current liabilities associated with working capital when calculating net working capital.

(True/False)

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Question 104

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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(80)

Question 105

Sanders Enterprises arranged a revolving credit agreement of $9,000,000 with a group of banks.The firm paid an annual commitment fee of 0.5% of the unused balance of the loan commitment.On the used portion of the revolver,it paid 1.5% above prime for the funds actually borrowed on a simple interest basis.The prime rate was 3.25% during the year.If the firm borrowed $6,000,000 immediately after the agreement was signed and repaid the loan at the end of one year,what was the total dollar annual cost of the revolver?

(Multiple Choice)

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Question 106

Shulman Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle? Angual sales = \ 45,000 Annual cost of goads sold = \ 30,000 Inventory = \ 4,500 Accaunts recervable = \ 1,800 Accaunts payable = 2,500

(Multiple Choice)

4.8/5

(83)

Question 107

Although short-term interest rates have historically averaged less than long-term rates,the heavy use of short-term debt is considered to be an aggressive current operating asset financing strategy because of the inherent risks of using short-term financing.

(True/False)

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Question 108

The four primary elements in a firm's credit policy are (1)credit standards, (2)discounts offered, (3)credit period,and (4)collection policy.

(True/False)

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Question 109

Long-term loan agreements always contain provisions,or covenants,that constrain the firm's future actions.Short-term credit agreements are just as restrictive in order to protect the interest of the lender.

(True/False)

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(89)

Question 110

If a firm switched from taking trade credit discounts to paying on the net due date,this might cost the firm some money,but such a policy would probably have only a negligible effect on the income statement and no effect whatever on the balance sheet.

(True/False)

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Question 111

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 112

Which of the following actions would be likely to shorten the cash conversion cycle?

(Multiple Choice)

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Question 113

Other things held constant,which of the following would tend to reduce the cash conversion cycle?

(Multiple Choice)

4.8/5

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Question 114

The risk to the firm of borrowing using short-term credit is usually greater than if it used long-term debt.Added risk stems from (1)the greater variability of interest costs on short-term than long-term debt and (2)the fact that even if its long-term prospects are good,the firm's lenders may not be willing to renew short-term loans if the firm is temporarily unable to repay those loans.

(True/False)

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Question 115

Net working capital is defined as current assets divided by current liabilities.

(True/False)

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Question 116

The facts (1)that no explicit interest is paid on accruals and (2)that the firm can control the level of these accounts at will makes them an attractive source of funding to meet working capital needs.

(True/False)

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(83)

Question 117

The maturity matching,or "self-liquidating," approach to financing involves obtaining the funds for permanent current assets with a combination of long-term capital and short-term capital that varies depending on the level of interest rates.When short-term rates are relatively high,short-term assets will be financed with long-term debt to reduce costs.

(True/False)

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Question 118

One of the advantages of short-term debt financing is that firms can obtain short-term credit more quickly than long-term credit.

(True/False)

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Question 119

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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(79)

Question 120

Showing 101 - 120 of 135

Exam 16: Supply Chains and Working Capital Management

The calculated cost of trade credit for a firm that buys on terms of 2/10 net 30 is lower (other things held constant)if the firm plans to pay in 40 days than in 30 days.

Uncertainty about the exact lives of assets prevents precise maturity matching in an ex post (i.e.,after the fact)sense even though it is possible to match maturities on an ex ante (expected)basis.

A lockbox plan is

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.

Shulman Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle? Angual sales = \ 45,000 Annual cost of goads sold = \ 30,000 Inventory = \ 4,500 Accaunts recervable = \ 1,800 Accaunts payable = 2,500

Although short-term interest rates have historically averaged less than long-term rates,the heavy use of short-term debt is considered to be an aggressive current operating asset financing strategy because of the inherent risks of using short-term financing.

The four primary elements in a firm's credit policy are (1)credit standards, (2)discounts offered, (3)credit period,and (4)collection policy.

Long-term loan agreements always contain provisions,or covenants,that constrain the firm's future actions.Short-term credit agreements are just as restrictive in order to protect the interest of the lender.

If a firm switched from taking trade credit discounts to paying on the net due date,this might cost the firm some money,but such a policy would probably have only a negligible effect on the income statement and no effect whatever on the balance sheet.

Which of the following statements is CORRECT?

Which of the following actions would be likely to shorten the cash conversion cycle?

Other things held constant,which of the following would tend to reduce the cash conversion cycle?

Net working capital is defined as current assets divided by current liabilities.

The facts (1)that no explicit interest is paid on accruals and (2)that the firm can control the level of these accounts at will makes them an attractive source of funding to meet working capital needs.

One of the advantages of short-term debt financing is that firms can obtain short-term credit more quickly than long-term credit.

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

Valuation of Stocks and Corporations

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

Agency Conflicts and 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

Extension 18 A: Rights Offerings

Lease Financing

Hybrid Financing: Preferred Stock, warrants, and Convertibles

Dynamic Capital Structures

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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