Question 1

Non-uniform demand can be accommodated in the EOQ model by allowing for non-uniform ordering costs.

Accepted Answer

A) True 
 B)False

Question 2

A trade credit discount such as 2/10 net 40 means

Accepted Answer

A)  a 2 percent penalty is due after 40 days. 
B)  a 2 percent discount if payment is made within 10 days, otherwise, the total amount is due in 40 days. 
C)  a 2 percent discount for payment within 10 days, and a 3 percent penalty if payment is made after 40 days. 
D)  10 percent discount for cash on delivery and a 2 percent discount for payment within 40 days. 
A)  a 2 percent penalty is due after 40 days. 
B)  a 2 percent discount if payment is made within 10 days, otherwise, the total amount is due in 40 days. 
C)  a 2 percent discount for payment within 10 days, and a 3 percent penalty if payment is made after 40 days. 
D)  10 percent discount for cash on delivery and a 2 percent discount for payment within 40 days.

Question 3

Brett's Gift Box estimates that it will sell 30,000 porcelain figurines next year.Because porcelain figurines are so easily damaged,the average per unit carrying cost of the figurines is $25.The per order cost of ordering is $800.Assume that Brett wants a safety stock of 75 figurines.If Brett reorders the figurines based on the economic order quantity,what is Brett's average inventory of porcelain figurines?

Accepted Answer

A)  768 
B)  854 
C)  628 
D)  700 
A)  768 
B)  854 
C)  628 
D)  700

Question 4

A zero balance account permits divisions to disburse funds while maintaining centralized control of several bank accounts.

Accepted Answer

A) True 
 B)False

Question 5

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

Accepted Answer

A) True 
 B)False

Question 6

U.S.Treasury bills are exempt from federal,state,and local income taxes.

Accepted Answer

A) True 
 B)False

Question 7

Mountain Snow Sports,Inc.is trying to determine the optimal order quantity for snow boards for the next twelve months.Annual sales are expected to be 1,000,000 units at a retail price of $400 each.The cost of carrying snow boards is $80 per year.Studies show that it costs Mountain Snow $250 to prepare and receive an order.What is the EOQ?

Accepted Answer

A)  2,750 
B)  2,500 
C)  2,000 
D)  1,850 
A)  2,750 
B)  2,500 
C)  2,000 
D)  1,850

Question 8

All of the following are false EXCEPT

Accepted Answer

A)  the mail float is caused by the time lapse from the moment a firm receives the check and begins to process it. 
B)  the processing float is caused by the time necessary for a bank to process the check. 
C)  the transit float is caused by the time lapse from the moment a customer mails a check until the firm begins to process it. 
D)  the disbursing float derives from the fact that funds remain in a firm's bank account until its payment check is cleared through the banking system. 
A)  the mail float is caused by the time lapse from the moment a firm receives the check and begins to process it. 
B)  the processing float is caused by the time necessary for a bank to process the check. 
C)  the transit float is caused by the time lapse from the moment a customer mails a check until the firm begins to process it. 
D)  the disbursing float derives from the fact that funds remain in a firm's bank account until its payment check is cleared through the banking system.

Question 9

What are the most important types of current assets? List your answer in order of declining liquidity.

Accepted Answer

Cash,marketable secu

Question 10

________ is a short-term promissory note sold by large corporations to raise cash.

Accepted Answer

A)  Repurchase agreement 
B)  Money-market mutual fund 
C)  Commercial paper 
D)  U.S. Treasury bill 
A)  Repurchase agreement 
B)  Money-market mutual fund 
C)  Commercial paper 
D)  U.S. Treasury bill

Question 11

Total float consists of each of the following elements EXCEPT

Accepted Answer

A)  mail float. 
B)  processing float. 
C)  transit float. 
D)  audit float. 
A)  mail float. 
B)  processing float. 
C)  transit float. 
D)  audit float.

Question 12

The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible.

Accepted Answer

A) True 
 B)False

Question 13

What are the key decision variables at the firm's disposal for managing the level of the firm's accounts receivable balance?

Accepted Answer

All firms by their very nature are invol

Question 14

A large corporation has annual sales revenues of $6 billion.The corporation currently earns 2.25% on its money-market account.If the corporation can reduce its float by three days by making its billing and collection functions more efficient,the company's operating profits will increase by approximately

Accepted Answer

A)  $3,069,863. 
B)  $2,196,500. 
C)  $1,350,000. 
D)  $1,109,589. 
A)  $3,069,863. 
B)  $2,196,500. 
C)  $1,350,000. 
D)  $1,109,589.

Question 15

Accounts receivable is an asset representing sales made on credit.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is used to manage a firm's cash disbursements?

Accepted Answer

A)  lockbox system 
B)  bankers' acceptances 
C)  repurchase agreements 
D)  zero balance accounts 
A)  lockbox system 
B)  bankers' acceptances 
C)  repurchase agreements 
D)  zero balance accounts

Question 17

The funds needed to satisfy the precautionary motive are entirely held in cash.

Accepted Answer

A) True 
 B)False

Question 18

Near-cash assets consist of marketable securities and accounts receivable.

Accepted Answer

A) True 
 B)False

Question 19

A company with national sales but only one large manufacturing operation and one administrative headquarters located in the same large northeastern city would most likely use which of the following techniques for cash management?

Accepted Answer

A)  lockbox system 
B)  zero balance accounts 
C)  payable-through drafts 
D)  bankers' acceptances 
A)  lockbox system 
B)  zero balance accounts 
C)  payable-through drafts 
D)  bankers' acceptances

Question 20

The selection of a proper marketable-securities mix involves evaluation of certain criteria.What are these criteria and why are they important?

Accepted Answer

Financial risk,interest rate risk,liquid

Non-uniform demand can be accommodated in the EOQ model by allowing for non-uniform ordering costs.

A trade credit discount such as 2/10 net 40 means

A zero balance account permits divisions to disburse funds while maintaining centralized control of several bank accounts.

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

U.S.Treasury bills are exempt from federal,state,and local income taxes.

All of the following are false EXCEPT

What are the most important types of current assets? List your answer in order of declining liquidity.

________ is a short-term promissory note sold by large corporations to raise cash.

Total float consists of each of the following elements EXCEPT

The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible.

What are the key decision variables at the firm's disposal for managing the level of the firm's accounts receivable balance?

Accounts receivable is an asset representing sales made on credit.

Which of the following is used to manage a firm's cash disbursements?

The funds needed to satisfy the precautionary motive are entirely held in cash.

Near-cash assets consist of marketable securities and accounts receivable.

A company with national sales but only one large manufacturing operation and one administrative headquarters located in the same large northeastern city would most likely use which of the following techniques for cash management?

The selection of a proper marketable-securities mix involves evaluation of certain criteria.What are these criteria and why are they important?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Filters

Exam 17: Cash,receivables,and Inventory Management

Non-uniform demand can be accommodated in the EOQ model by allowing for non-uniform ordering costs.

A trade credit discount such as 2/10 net 40 means

A zero balance account permits divisions to disburse funds while maintaining centralized control of several bank accounts.

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

U.S.Treasury bills are exempt from federal,state,and local income taxes.

All of the following are false EXCEPT

What are the most important types of current assets? List your answer in order of declining liquidity.

________ is a short-term promissory note sold by large corporations to raise cash.

Total float consists of each of the following elements EXCEPT

The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible.

What are the key decision variables at the firm's disposal for managing the level of the firm's accounts receivable balance?

Accounts receivable is an asset representing sales made on credit.

Which of the following is used to manage a firm's cash disbursements?

The funds needed to satisfy the precautionary motive are entirely held in cash.

Near-cash assets consist of marketable securities and accounts receivable.

A company with national sales but only one large manufacturing operation and one administrative headquarters located in the same large northeastern city would most likely use which of the following techniques for cash management?

The selection of a proper marketable-securities mix involves evaluation of certain criteria.What are these criteria and why are they important?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Filters