Question 1

Inventory carrying costs:

Accepted Answer

A) include the costs of generating memos, fax transmissions, etc. associated with placing an order with a supplier. 
B) generally increase in proportion to the average amount of inventory held. 
C) are fixed regardless of the average size of the inventory. 
D) are equal to the sum of total inventory costs and total ordering costs. 
E) are at maximum when a firm's order is equal to optimal quantity. 
A) include the costs of generating memos, fax transmissions, etc. associated with placing an order with a supplier. 
B) generally increase in proportion to the average amount of inventory held. 
C) are fixed regardless of the average size of the inventory. 
D) are equal to the sum of total inventory costs and total ordering costs. 
E) are at maximum when a firm's order is equal to optimal quantity.

Question 2

The Danser Corporation expects to generate sales equal to $30,000 in January, $33,000 in February, and $38,000 in March. Twenty (20) percent of all sales are for cash, 50 percent are credit sales that are paid in the month following the sale, and 30 percent are credit sales that are paid two months following the sale. What are Danser's total cash collections in March?

Accepted Answer

A) $35,800 
B) $40,400 
C) $33,667 
D) $33,100 
E) $33,900 
A) $35,800 
B) $40,400 
C) $33,667 
D) $33,100 
E) $33,900

Question 3

A(n) ______ is a report that shows how long accounts receivable have been outstanding; it divides receivables into specified periods that provide information regarding the proportions of receivables that are due for specific periods of time.

Accepted Answer

A) payables time line 
B) collection float schedule 
C) aging schedule 
D) accounts payable tracker 
E) credit indenture 
A) payables time line 
B) collection float schedule 
C) aging schedule 
D) accounts payable tracker 
E) credit indenture

Question 4

Which of the following statements about the cash management in multinational companies is correct?

Accepted Answer

A) Most multinational companies prefer to operate in countries that enact quotas on imported goods, because such quotas normally limit the amount of money the firms can lose in those countries. 
B) Multinational companies do not use lock box systems, because most countries do not permit such banking arrangements. 
C) Multinational companies always prefer holding more cash in their foreign operations than in their domestic operations. 
D) Multinational companies often try to slow down collections and speed up disbursements where possible. 
E) Most multinational companies face restrictions imposed by foreign governments when transferring funds from their foreign operations to their home countries. 
A) Most multinational companies prefer to operate in countries that enact quotas on imported goods, because such quotas normally limit the amount of money the firms can lose in those countries. 
B) Multinational companies do not use lock box systems, because most countries do not permit such banking arrangements. 
C) Multinational companies always prefer holding more cash in their foreign operations than in their domestic operations. 
D) Multinational companies often try to slow down collections and speed up disbursements where possible. 
E) Most multinational companies face restrictions imposed by foreign governments when transferring funds from their foreign operations to their home countries.

Question 5

The threat of expropriation creates an incentive for a multinational firm to minimize inventory holdings and to bring goods into a foreign country only as needed.

Accepted Answer

A) True 
 B)False

Question 6

Given the following information, what is the economic ordering quantity (EOQ) for Nashville Records Inc.? ​
Total demand (sales) = 15,625 units per year
Selling price = $10 per unit
Purchase price (cost) = $5
Carrying costs = 25 percent of inventory value
Fixed cost per order = $1,000

Accepted Answer

A) 3,536 units 
B) 5,000 units 
C) 3,953 units 
D) 1,581 units 
E) 2,500 units 
A) 3,536 units 
B) 5,000 units 
C) 3,953 units 
D) 1,581 units 
E) 2,500 units

Question 7

Outsourcing is an inventory control procedure where a red line is drawn around the inside of an inventory-stocked bin to indicate the level of inventory at which an order for new raw materials should be initiated.

Accepted Answer

A) True 
 B)False

Question 8

New Markets' economic ordering quantity (EOQ) is 30,000 widgets. New Markets' EOQ will decrease if the ______ increases.

Accepted Answer

A) selling price of the widgets 
B) fixed costs to make each order of raw materials 
C) demand for its widgets. 
D) cost of carrying each widget 
E) cash discount offered to credit customers 
A) selling price of the widgets 
B) fixed costs to make each order of raw materials 
C) demand for its widgets. 
D) cost of carrying each widget 
E) cash discount offered to credit customers

Question 9

Aberwald Corporation expects to sell 120,000 memory chips this year. Aberwald has determined that it costs $3 to carry each chip in inventory and $50 each time an order for raw materials is placed. Assuming Aberwald always orders the EOQ amount, what will be its total ordering cost this year?

Accepted Answer

A) $7,2000 
B) $260,000 
C) $3,000 
D) $800 
E) $6,000 
A) $7,2000 
B) $260,000 
C) $3,000 
D) $800 
E) $6,000

Question 10

Which of the following is a common method that is used to manage/control cash disbursements?

Accepted Answer

A) Lockbox arrangement 
B) Zero-balance account 
C) Concentration banking 
D) Preauthorized sales 
E) Net float agreement 
A) Lockbox arrangement 
B) Zero-balance account 
C) Concentration banking 
D) Preauthorized sales 
E) Net float agreement

Question 11

Which of the following types of inventory has completed the production process and is ready for sale?

Accepted Answer

A) Just-in-time inventory 
B) Materials in transit 
C) Raw materials 
D) Work-in-process 
E) Finished goods 
A) Just-in-time inventory 
B) Materials in transit 
C) Raw materials 
D) Work-in-process 
E) Finished goods

Question 12

Suppose that two firms are identical in all aspects except for their credit policies. The days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct?

Accepted Answer

A) Firm A takes more time to collect its receivables than Firm B. 
B) Firm A has tighter credit terms than Firm B. 
C) Firm A has a weaker collection team than Firm B. 
D) Firm A provides less discount to its customers to pay its bills early than Firm B. 
E) Firm A has weaker receivables monitoring system than Firm B. 
A) Firm A takes more time to collect its receivables than Firm B. 
B) Firm A has tighter credit terms than Firm B. 
C) Firm A has a weaker collection team than Firm B. 
D) Firm A provides less discount to its customers to pay its bills early than Firm B. 
E) Firm A has weaker receivables monitoring system than Firm B.

Question 13

______ is a model that a firm's management can use to determine the amount of inventory that should be ordered and carried to minimize its total inventory costs.

Accepted Answer

A) Economic ordering quantity model 
B) Lockbox system algorithm 
C) Receivables monitoring model 
D) Inventory optimization model 
E) Quantity discount model 
A) Economic ordering quantity model 
B) Lockbox system algorithm 
C) Receivables monitoring model 
D) Inventory optimization model 
E) Quantity discount model

Question 14

Governments often impose _____ to restrict the quantities of foreign products that multinational firms can bring into their countries.

Accepted Answer

A) stockout rules 
B) negative tariffs 
C) quotas 
D) custom exclusions 
E) expropriation restrictions 
A) stockout rules 
B) negative tariffs 
C) quotas 
D) custom exclusions 
E) expropriation restrictions

Question 15

A firm's credit policy includes procedures that it follows to collect its accounts receivable.

Accepted Answer

A) True 
 B)False

Question 16

Chadmark Corporation's budgeted monthly sales are $3,000. The company sells on credit with terms of 2/10 net 45. Forty (40) percent of Chadmark's customers pay on Day 10 and take the 2 percent discount; the remaining 60 percent pay in the month following the sale (on Day 45), so they pay the full invoice price. What is Chadmark's total cash receipts for a typical month?

Accepted Answer

A) $1,543 
B) $2,976 
C) $3,200 
D) $1,652 
E) $2,408 
A) $1,543 
B) $2,976 
C) $3,200 
D) $1,652 
E) $2,408

Question 17

Ace Hardware's economic ordering quantity (EOQ) is 1,000 widgets, its total demand is 20,000 units per period, its carrying costs per unit are 20 percent of the inventory value, each inventory item costs $4 to purchase, and it costs $20 each time inventory is order. What is Ace's total inventory costs if it orders the EOQ amount?

Accepted Answer

A) $1,200 
B) $1,000 
C) $16,400 
D) $8,400 
E) $800 
A) $1,200 
B) $1,000 
C) $16,400 
D) $8,400 
E) $800

Question 18

The "redline method" that is used in inventory management is a:

Accepted Answer

A) policy of drawing a red line around the firm's location to determine from which suppliers it should purchase raw materials. 
B) restriction imposed on the amount of inventory a company that uses a just-in-time inventory system can order. 
C) minimum credit score (hurdle) that a customer must possess to purchase inventory on credit from the selling firm.c 
D) method of controlling inventories by drawing a red line around the inside of a bin. 
E) method of controlling receivables by drawing a red line on invoices of companies that normally pay late. 
A) policy of drawing a red line around the firm's location to determine from which suppliers it should purchase raw materials. 
B) restriction imposed on the amount of inventory a company that uses a just-in-time inventory system can order. 
C) minimum credit score (hurdle) that a customer must possess to purchase inventory on credit from the selling firm.c 
D) method of controlling inventories by drawing a red line around the inside of a bin. 
E) method of controlling receivables by drawing a red line on invoices of companies that normally pay late.

Question 19

The ______ is minimized when a company uses the economic ordering quantity (EOQ) model for its inventory management.

Accepted Answer

A) cost of carrying inventory 
B) total inventory cost 
C) total cost of purchasing inventory 
D) total cost of ordering inventory 
E) amount of quantity discounts taken 
A) cost of carrying inventory 
B) total inventory cost 
C) total cost of purchasing inventory 
D) total cost of ordering inventory 
E) amount of quantity discounts taken

Question 20

The lower the level of current assets that is required to support its operations, the more closely a firm can adhere to a _____ current asset investment policy.

Accepted Answer

A) relaxed 
B) restricted 
C) moderate 
D) lean-and-mean 
E) precautionary 
A) relaxed 
B) restricted 
C) moderate 
D) lean-and-mean 
E) precautionary

Inventory carrying costs:

A(n) ______ is a report that shows how long accounts receivable have been outstanding; it divides receivables into specified periods that provide information regarding the proportions of receivables that are due for specific periods of time.

Which of the following statements about the cash management in multinational companies is correct?

The threat of expropriation creates an incentive for a multinational firm to minimize inventory holdings and to bring goods into a foreign country only as needed.

Given the following information, what is the economic ordering quantity (EOQ) for Nashville Records Inc.? Total demand (sales) = 15,625 units per year Selling price = $10 per unit Purchase price (cost) = $5 Carrying costs = 25 percent of inventory value Fixed cost per order = $1,000

Outsourcing is an inventory control procedure where a red line is drawn around the inside of an inventory-stocked bin to indicate the level of inventory at which an order for new raw materials should be initiated.

New Markets' economic ordering quantity (EOQ) is 30,000 widgets. New Markets' EOQ will decrease if the ______ increases.

Aberwald Corporation expects to sell 120,000 memory chips this year. Aberwald has determined that it costs $3 to carry each chip in inventory and $50 each time an order for raw materials is placed. Assuming Aberwald always orders the EOQ amount, what will be its total ordering cost this year?

Which of the following is a common method that is used to manage/control cash disbursements?

Which of the following types of inventory has completed the production process and is ready for sale?

Suppose that two firms are identical in all aspects except for their credit policies. The days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct?

______ is a model that a firm's management can use to determine the amount of inventory that should be ordered and carried to minimize its total inventory costs.

Governments often impose _____ to restrict the quantities of foreign products that multinational firms can bring into their countries.

A firm's credit policy includes procedures that it follows to collect its accounts receivable.

The "redline method" that is used in inventory management is a:

The ______ is minimized when a company uses the economic ordering quantity (EOQ) model for its inventory management.

The lower the level of current assets that is required to support its operations, the more closely a firm can adhere to a _____ current asset investment policy.

An Overview of Managerial Finance

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debt Characteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Financial Planning and Control

Filters

Exam 15: Managing Short-Term Assets

Inventory carrying costs:

A(n) ______ is a report that shows how long accounts receivable have been outstanding; it divides receivables into specified periods that provide information regarding the proportions of receivables that are due for specific periods of time.

Which of the following statements about the cash management in multinational companies is correct?

The threat of expropriation creates an incentive for a multinational firm to minimize inventory holdings and to bring goods into a foreign country only as needed.

Given the following information, what is the economic ordering quantity (EOQ) for Nashville Records Inc.? ​ Total demand (sales) = 15,625 units per year Selling price = $10 per unit Purchase price (cost) = $5 Carrying costs = 25 percent of inventory value Fixed cost per order = $1,000

Outsourcing is an inventory control procedure where a red line is drawn around the inside of an inventory-stocked bin to indicate the level of inventory at which an order for new raw materials should be initiated.

New Markets' economic ordering quantity (EOQ) is 30,000 widgets. New Markets' EOQ will decrease if the ______ increases.

Aberwald Corporation expects to sell 120,000 memory chips this year. Aberwald has determined that it costs $3 to carry each chip in inventory and $50 each time an order for raw materials is placed. Assuming Aberwald always orders the EOQ amount, what will be its total ordering cost this year?

Which of the following is a common method that is used to manage/control cash disbursements?

Which of the following types of inventory has completed the production process and is ready for sale?

Suppose that two firms are identical in all aspects except for their credit policies. The days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct?

______ is a model that a firm's management can use to determine the amount of inventory that should be ordered and carried to minimize its total inventory costs.

Governments often impose _____ to restrict the quantities of foreign products that multinational firms can bring into their countries.

A firm's credit policy includes procedures that it follows to collect its accounts receivable.

The "redline method" that is used in inventory management is a:

The ______ is minimized when a company uses the economic ordering quantity (EOQ) model for its inventory management.

The lower the level of current assets that is required to support its operations, the more closely a firm can adhere to a _____ current asset investment policy.

An Overview of Managerial Finance

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debt Characteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Financial Planning and Control

Filters

Given the following information, what is the economic ordering quantity (EOQ) for Nashville Records Inc.? Total demand (sales) = 15,625 units per year Selling price = $10 per unit Purchase price (cost) = $5 Carrying costs = 25 percent of inventory value Fixed cost per order = $1,000