Exam 17: Cash,receivables,and Inventory Management

Because poor creditworthy customers may cause bad debt losses,credit sales to them should not be allowed.

A Treasury bill is a near-cash asset.

Which of the following are short-term,unsecured promissory notes sold by large businesses?

Newtown Manufacturing,Inc.uses semi-hex joints in its manufacturing process.If Newtown's total demand for the joints for next year is estimated to be 57,000 units,and if the cost per order is $225,what is Newtown's economic order quantity of semi-hex joints? Assume that carrying costs for semi-hex joints are $0.75 per unit.

A lockbox system can reduce all of the following elements of float EXCEPT

Commercial paper is a short-term,unsecured,promissory note.

An extremely liquid asset is one that can be sold for cash quickly without a reduction in price below its current market value.

Two factors that go into the determination of the appropriate order point are the deliver-time stock and the safety stock required.

Fiesta Taco Company purchases 30,000 boxes of ground beef each year.It costs $50 to place each order and $10.00 per year for each box held as inventory. a.What is the average inventory held during the year? b.What is the economic order quantity for the ground beef? c.How many orders will be made each year?

Brett's,Inc.is a national distributor of women's apparel.The company expects to receive 95,000 checks during the coming year totaling $78 million.A large bank has offered to install a lock-box system at a charge of $0.45 per processed check.If Brett's,Inc.is able to earn 5 percent before tax on additional funds,what is the minimum amount of total float days that must be saved to make the system worthwhile? Use a 365-day year.

One method used to monitor the collections of accounts receivable is aging.

Determine the effective annualized cost of forgoing the trade discount on terms 1/20 net 45.

Compare the risk of a 90-day unsecured promissory note issued by Southwest Airlines to a 20-year U.S.Government Treasury bond.

The financial manager is concerned with

Which of the following might occur when a firm increases its collection efforts?

Carrying inventory reduces the costs associated with periodic bad debt losses.

The terms of sale identify the possible discount for early payment,the discount period,and the total credit period.

The risk-return trade-off leads to two objectives: (1)keep enough cash on hand to make necessary payments,and (2)reduce investments in idle cash to a minimum.

What is a lockbox arrangement,and how does its use reduce a firm's float?

The Siskiyou Manufacturing Company will collect an estimated $12,000,000 next year; and it will receive an estimated 20,000 checks.Siskiyou's bank has offered to set up a lock-box system that will reduce float time by 4.5 days.The cost of the system will be $.15 per check.What is the minimum annual interest rate on its cash balance that Siskiyou should receive before it would be willing to adopt the lock-box system?