Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would not normally be discussed when describing a firm's short-term operating cycle?

Accepted Answer

A) manufacturing process 
B) selling effort 
C) acquiring financing 
D) collection period 
A) manufacturing process 
B) selling effort 
C) acquiring financing 
D) collection period

Question 3

The objective of managing current assets and liabilities is to

Accepted Answer

A) achieve as low a level of current assets as possible. 
B) achieve as low a level of current liabilities as possible. 
C) achieve a balance between profitability and risk that detracts from the firm's value. 
D) achieve as high a level of current liabilities as possible. 
E) none of the above 
A) achieve as low a level of current assets as possible. 
B) achieve as low a level of current liabilities as possible. 
C) achieve a balance between profitability and risk that detracts from the firm's value. 
D) achieve as high a level of current liabilities as possible. 
E) none of the above

Question 4

Working capital is essentially a firm's current assets and consists of cash,accounts receivable,inventories,plant and equipment.

Accepted Answer

A) True 
 B)False

Question 5

Both the operating cycle and the cash conversion cycle can be reduced by shortening the inventory period.

Accepted Answer

A) True 
 B)False

Question 6

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) 85 
B) 75 
C) 65 
D) 55 
E) none of the above 
A) 85 
B) 75 
C) 65 
D) 55 
E) none of the above

Question 7

A firm has a minimum desired cash balance of $120,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

Accepted Answer

A) -$120,000 
B) $25,000 
C) $215,000 
D) cannot determine from this information 
A) -$120,000 
B) $25,000 
C) $215,000 
D) cannot determine from this information

Question 8

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 9

In a perfect world,a firm would prefer to have a

Accepted Answer

A) positive operating cycle. 
B) negative operating cycle. 
C) positive cash conversion cycle. 
D) negative cash conversion cycle. 
E) none of above are correct 
A) positive operating cycle. 
B) negative operating cycle. 
C) positive cash conversion cycle. 
D) negative cash conversion cycle. 
E) none of above are correct

Question 10

Federal funds rates usually parallel the:

Accepted Answer

A) prime rate 
B) U.S.Treasury bill rate 
C) Dow Jones Industrial Average 
D) none of the above 
A) prime rate 
B) U.S.Treasury bill rate 
C) Dow Jones Industrial Average 
D) none of the above

Question 11

A firm has a minimum desired cash balance of $10,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

Accepted Answer

A) -$2,000 
B) $10,000 
C) $3,000 
D) cannot determine from this information 
A) -$2,000 
B) $10,000 
C) $3,000 
D) cannot determine from this information

Question 12

The delivery or transmission float is the delay in transferring the means of payment from the payor (customer)to the payee (the provider of goods or services).

Accepted Answer

A) True 
 B)False

Question 13

Lowering a firm's credit standards or customer credit quality will cause the average collection period to lengthen.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A level production plan has problems,such as idle plant and laid-off workers during slow sales months and production bottlenecks during busy times.

Accepted Answer

A) True 
 B)False

Question 16

Ningbo shipping has projected sales in May,June,and July of $500,$600,and $700,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) none of the above 
A) $220 
B) $200 
C) $180 
D) none of the above

Question 17

A risk which results from a firm's inability to meet currently maturing obligations is often referred to as:

Accepted Answer

A) liquidity risk 
B) purchasing power risk 
C) interest rate risk 
D) financial leverage risk 
A) liquidity risk 
B) purchasing power risk 
C) interest rate risk 
D) financial leverage risk

Question 18

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) none of the above 
A) operating cycle 
B) cash conversion cycle 
C) accounts receivable period 
D) none of the above

Question 19

Methods used to speed up collections include all of the following except:

Accepted Answer

A) a lockbox system 
B) remote disbursement locations 
C) pre-authorized checks 
D) All of the statements above are correct. 
A) a lockbox system 
B) remote disbursement locations 
C) pre-authorized checks 
D) All of the statements above are correct.

Question 20

The size of the cash buffer depends upon:

Accepted Answer

A) the ability to easily acquire financing on short notice 
B) the predictability of cash inflows 
C) all the above 
A) the ability to easily acquire financing on short notice 
B) the predictability of cash inflows 
C) all the above

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

Which of the following would not normally be discussed when describing a firm's short-term operating cycle?

The objective of managing current assets and liabilities is to

Working capital is essentially a firm's current assets and consists of cash,accounts receivable,inventories,plant and equipment.

Both the operating cycle and the cash conversion cycle can be reduced by shortening the inventory 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.

A firm has a minimum desired cash balance of $120,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

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.

In a perfect world,a firm would prefer to have a

Federal funds rates usually parallel the:

A firm has a minimum desired cash balance of $10,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

The delivery or transmission float is the delay in transferring the means of payment from the payor (customer)to the payee (the provider of goods or services).

Lowering a firm's credit standards or customer credit quality will cause the average collection period to lengthen.

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

A level production plan has problems,such as idle plant and laid-off workers during slow sales months and production bottlenecks during busy times.

Ningbo shipping has projected sales in May,June,and July of $500,$600,and $700,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

A risk which results from a firm's inability to meet currently maturing obligations is often referred to as:

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

Methods used to speed up collections include all of the following except:

The size of the cash buffer depends upon:

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 Valuation

Securities 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

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

Which of the following would not normally be discussed when describing a firm's short-term operating cycle?

The objective of managing current assets and liabilities is to

Working capital is essentially a firm's current assets and consists of cash,accounts receivable,inventories,plant and equipment.

Both the operating cycle and the cash conversion cycle can be reduced by shortening the inventory 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.

A firm has a minimum desired cash balance of $120,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

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.

In a perfect world,a firm would prefer to have a

Federal funds rates usually parallel the:

A firm has a minimum desired cash balance of $10,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

The delivery or transmission float is the delay in transferring the means of payment from the payor (customer)to the payee (the provider of goods or services).

Lowering a firm's credit standards or customer credit quality will cause the average collection period to lengthen.

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

A level production plan has problems,such as idle plant and laid-off workers during slow sales months and production bottlenecks during busy times.

Ningbo shipping has projected sales in May,June,and July of $500,$600,and $700,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

A risk which results from a firm's inability to meet currently maturing obligations is often referred to as:

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

Methods used to speed up collections include all of the following except:

The size of the cash buffer depends upon:

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 Valuation

Securities 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