Question 1

When accounts payable exceed the sum of inventory and accounts receivable, net working capital is negative.

Accepted Answer

A) True 
 B)False

Question 2

As for the preparation of cash budgets, capital expenditures are:

Accepted Answer

A) Not included because these items are depreciated 
B) Included as sources of operating cash 
C) Included as uses of cash and make the budget lumpy 
D) Traditionally offset as a use of cash by interest income 
A) Not included because these items are depreciated 
B) Included as sources of operating cash 
C) Included as uses of cash and make the budget lumpy 
D) Traditionally offset as a use of cash by interest income

Question 3

Zoma Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:

Accepted Answer

The answer of Zoma Corporation is estimating its cash collections...

Question 4

What is the inventory period for a firm with an annual cost of goods sold of $8 million, $1.5 million in average inventory, and a cash conversion cycle of 75 days?

Accepted Answer

A) 6.56 days 
B) 18.75 days 
C) 53.33 days 
D) 68.44 days inventory period = 
A) 6.56 days 
B) 18.75 days 
C) 53.33 days 
D) 68.44 days inventory period =

Question 5

Optimizing cash balances involves the equating of:

Accepted Answer

A) Total benefits and total opportunity costs 
B) Average benefits and average opportunity costs 
C) Accounts receivable and accounts payable 
D) Marginal benefits and marginal opportunity costs 
A) Total benefits and total opportunity costs 
B) Average benefits and average opportunity costs 
C) Accounts receivable and accounts payable 
D) Marginal benefits and marginal opportunity costs

Question 6

Changing the method of depreciation from straight line to MACRS is a source of cash for the firm.

Accepted Answer

The answer of Changing the method of depreciation from straight...

Question 7

Create the statement of sources and uses of cash from the following entries:

Accepted Answer

The answer of Create the statement of sources and uses...

Question 8

The time interval between paying for raw materials and collecting on sales of finished goods is known as the:

Accepted Answer

A) Inventory cycle 
B) Matching cycle 
C) Cash conversion cycle 
D) Accounts receivable cycle 
A) Inventory cycle 
B) Matching cycle 
C) Cash conversion cycle 
D) Accounts receivable cycle

Question 9

As a firm's cash conversion cycle increases, the firm:

Accepted Answer

A) Becomes less profitable 
B) Increases its investment in working capital 
C) Reduces its accounts payable period 
D) Incurs more shortage costs 
A) Becomes less profitable 
B) Increases its investment in working capital 
C) Reduces its accounts payable period 
D) Incurs more shortage costs

Question 10

Maintaining a compensating balance will:

Accepted Answer

A) Decrease the effective annual rate 
B) Increase the effective annual rate 
C) Not change the effective annual rate 
D) Only change the effective rate if payments occur more frequently than annually 
A) Decrease the effective annual rate 
B) Increase the effective annual rate 
C) Not change the effective annual rate 
D) Only change the effective rate if payments occur more frequently than annually

Question 11

Field warehousing can be an important source of:

Accepted Answer

A) Additional storage space for cash-strapped firms 
B) Investing for those who follow the "relaxed cash strategy" 
C) Cash management for those who factor receivables 
D) Short-term financing with low risk to the lender 
A) Additional storage space for cash-strapped firms 
B) Investing for those who follow the "relaxed cash strategy" 
C) Cash management for those who factor receivables 
D) Short-term financing with low risk to the lender

Question 12

List and explain the four forecast uses of cash.

Accepted Answer

1.Payments of Accounts Payable

Question 13

An increase in accounts payable is a source of cash.

Accepted Answer

A) True 
 B)False

Question 14

In "field warehousing" the inventory is kept by the:

Accepted Answer

A) Borrowing firm 
B) Lending institution 
C) Independent warehousing company 
D) Jointly by the firm and the lender 
A) Borrowing firm 
B) Lending institution 
C) Independent warehousing company 
D) Jointly by the firm and the lender

Question 15

What is the length of the cash conversion cycle for a firm with $50,000 in average inventory, $60,000 in average receivables, $30,000 in average payables, annual sales of $700,000, and a cost of goods sold of 75%?

Accepted Answer

Cash conversion cycl

Question 16

During the year the following changes were observed. (I.) Inventory period increased by 12 days
(II)) Receivables period decreased by 6 days
(III.) Accounts payable period increased by 4 days
Find the net change in cash conversion cycle.

Accepted Answer

A) -10 days 
B) +2 days 
C) +10 days 
D) +14 days ∆cash conversion cycle = (∆inventory period + ∆receivables period) - ∆accounts receivable period 
A) -10 days 
B) +2 days 
C) +10 days 
D) +14 days ∆cash conversion cycle = (∆inventory period + ∆receivables period) - ∆accounts receivable period

Question 17

Globex Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:

Accepted Answer

The answer of Globex Corporation is estimating its cash collections...

Question 18

A credit card company charges its customers an annual interest of 21.0% on the outstanding monthly balance.The effective annual rate for the customer will be:

Accepted Answer

A) 21.00% 
B) 21.20% 
C) 23.14% 
D) 37.93% Effective annual rate = 
A) 21.00% 
B) 21.20% 
C) 23.14% 
D) 37.93% Effective annual rate =

Question 19

Which of the following would act to reduce the carrying costs of inventory?

Accepted Answer

A) The inventory is capable of spoiling 
B) The inventory will rapidly go out of style 
C) General interest rates decrease in the economy 
D) General interest rates increase in the economy 
A) The inventory is capable of spoiling 
B) The inventory will rapidly go out of style 
C) General interest rates decrease in the economy 
D) General interest rates increase in the economy

Question 20

Noorie Corporation is planning its production and ending inventory for the next quarter.The CFO has provided you with the following information:

Accepted Answer

@#IMG-DLM& Using this informat

Exam 20: Working Capital Management

When accounts payable exceed the sum of inventory and accounts receivable, net working capital is negative.

As for the preparation of cash budgets, capital expenditures are:

What is the inventory period for a firm with an annual cost of goods sold of $8 million, $1.5 million in average inventory, and a cash conversion cycle of 75 days?

Optimizing cash balances involves the equating of:

Changing the method of depreciation from straight line to MACRS is a source of cash for the firm.

Create the statement of sources and uses of cash from the following entries:

The time interval between paying for raw materials and collecting on sales of finished goods is known as the:

As a firm's cash conversion cycle increases, the firm:

Maintaining a compensating balance will:

Field warehousing can be an important source of:

List and explain the four forecast uses of cash.

An increase in accounts payable is a source of cash.

In "field warehousing" the inventory is kept by the:

What is the length of the cash conversion cycle for a firm with $50,000 in average inventory, $60,000 in average receivables, $30,000 in average payables, annual sales of $700,000, and a cost of goods sold of 75%?

During the year the following changes were observed. (I.) Inventory period increased by 12 days (II)) Receivables period decreased by 6 days (III.) Accounts payable period increased by 4 days Find the net change in cash conversion cycle.

A credit card company charges its customers an annual interest of 21.0% on the outstanding monthly balance.The effective annual rate for the customer will be:

Which of the following would act to reduce the carrying costs of inventory?

Noorie Corporation is planning its production and ending inventory for the next quarter.The CFO has provided you with the following information:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

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