Question 1

Which of the following is not included in current liabilities?

Accepted Answer

A)  Accounts payable 
B)  Prepaid insurance 
C)  Accrued expenses payable 
D)  Taxes payable 
E)  Notes payable 
A)  Accounts payable 
B)  Prepaid insurance 
C)  Accrued expenses payable 
D)  Taxes payable 
E)  Notes payable

Question 2

A manufacturing firm has a 90 day collection period. The firm produces seasonal merchandise and thus has the least sales during the first quarter of a year and the highest level of sales during the third quarter of a year. The firm maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters. The firm is most apt to face a cash-out situation in:

Accepted Answer

A)  the first quarter. 
B)  the second quarter. 
C)  the third quarter. 
D)  the fourth quarter. 
E)  any quarter, equally. 
A)  the first quarter. 
B)  the second quarter. 
C)  the third quarter. 
D)  the fourth quarter. 
E)  any quarter, equally.

Question 3

Which one of the following managers is most likely in charge of establishing the accounts receivable policy?

Accepted Answer

A)  Purchasing manager 
B)  Credit manager 
C)  Controller 
D)  Production manager 
E)  Payables manager 
A)  Purchasing manager 
B)  Credit manager 
C)  Controller 
D)  Production manager 
E)  Payables manager

Question 4

Your firm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year,your inventory was $31,000. At the end of the year,the inventory balance was $33,000. What is the inventory turnover rate?

Accepted Answer

A)  11.23 times 
B)  12.56 times 
C)  18.60 times 
D)  19.63 times 
E)  29.06 times 
A)  11.23 times 
B)  12.56 times 
C)  18.60 times 
D)  19.63 times 
E)  29.06 times

Question 5

The inventory turnover for the Lambkin Company was 8 times and its days sales in receivables was 55. What is the operating cycle for Lambkin given a 365-day year?

Accepted Answer

A)  45.63 days 
B)  55.00 days 
C)  63.25 days 
D)  100.63 days 
E)  110.00 days 
A)  45.63 days 
B)  55.00 days 
C)  63.25 days 
D)  100.63 days 
E)  110.00 days

Question 6

A short-term loan secured by the borrower's inventory,either directly or via an intermediary,is called a(n):

Accepted Answer

A)  debenture. 
B)  line of credit. 
C)  banker's acceptance. 
D)  compensating balance. 
E)  inventory loan. 
A)  debenture. 
B)  line of credit. 
C)  banker's acceptance. 
D)  compensating balance. 
E)  inventory loan.

Question 7

A firm currently has a 43 day cash cycle. Assume that the firm changes its operations such that it increases its receivables period by 2 days,decreases its inventory period by 1 day and increases its payables period by 3 days. What will the length of the cash cycle be after these changes?

Accepted Answer

A)  38 days 
B)  39 days 
C)  41 days 
D)  43 days 
E)  45 days 
A)  38 days 
B)  39 days 
C)  41 days 
D)  43 days 
E)  45 days

Question 8

Which one of the following statements is correct concerning the cash cycle?

Accepted Answer

A)  The longer the cash cycle, the more likely a firm will need external financing. 
B)  Increasing the accounts payable period increases the cash cycle. 
C)  A positive cash cycle is preferable to a negative cash cycle. 
D)  The cash cycle can exceed the operating cycle if the payables period is equal to zero. 
E)  Adopting a more liberal accounts receivable policy will tend to decrease the cash cyclE. 
A)  The longer the cash cycle, the more likely a firm will need external financing. 
B)  Increasing the accounts payable period increases the cash cycle. 
C)  A positive cash cycle is preferable to a negative cash cycle. 
D)  The cash cycle can exceed the operating cycle if the payables period is equal to zero. 
E)  Adopting a more liberal accounts receivable policy will tend to decrease the cash cyclE.

Question 9

In working capital management,there are some actions that increase or decrease cash. What are some of the items that increase and decrease the cash account,respectively?

Accepted Answer

There are several activities that will i

Question 10

A flexible short-term financial policy:

Accepted Answer

A)  is associated with firms where the carrying costs are considered to be less than the shortage costs. 
B)  applies mostly to firms where the shortage costs tend to be less than the carrying costs. 
C)  applies only to firms that strictly limit their credit sales. 
D)  tends to decrease the amount of current assets held by a firm. 
E)  is designed to utilize short-term external financing to fund all of the seasonal increases in current assets. 
A)  is associated with firms where the carrying costs are considered to be less than the shortage costs. 
B)  applies mostly to firms where the shortage costs tend to be less than the carrying costs. 
C)  applies only to firms that strictly limit their credit sales. 
D)  tends to decrease the amount of current assets held by a firm. 
E)  is designed to utilize short-term external financing to fund all of the seasonal increases in current assets.

Question 11

A type of short-term loan where the borrower sells its receivables to the lender up-front,but at a discount to face value,is called:

Accepted Answer

A)  a compensating balance. 
B)  assigned receivables financing. 
C)  a letter of credit. 
D)  factored receivables financing. 
E)  a bond. 
A)  a compensating balance. 
B)  assigned receivables financing. 
C)  a letter of credit. 
D)  factored receivables financing. 
E)  a bond.

Question 12

Which of the following are uses of cash?
I. marketable securities are sold.
II. the amount of inventory on hand is increased.
III. the firm takes out a long-term bank loan.
IV. payments are paid on accounts payable.

Accepted Answer

A)  I and III only. 
B)  II and IV only. 
C)  I and IV only. 
D)  II and III only. 
E)  II, III and IV only. 
A)  I and III only. 
B)  II and IV only. 
C)  I and IV only. 
D)  II and III only. 
E)  II, III and IV only.

Question 13

Which of the following are benefits of compiling a short-term financial plan?
I. knowing ahead of time when your firm will probably require external financing
II. being able to estimate how long of a time period your firm might need a loan
III. being able to determine when your firm can best afford to spend funds on a capital expenditure
IV. knowing when your firm should have excess funds that can be invested

Accepted Answer

A)  I and III only 
B)  I, II and IV only 
C)  II, III and IV only 
D)  I, II and III only 
E)  I, II, III and IV 
A)  I and III only 
B)  I, II and IV only 
C)  II, III and IV only 
D)  I, II and III only 
E)  I, II, III and IV

Question 14

The short-term financial policy that a firm adopts will be reflected in:

Accepted Answer

A)  the size of the firm's investment in current assets. 
B)  the financing of current assets. 
C)  the financing of fixed assets. 
D)  Both the size of the firm's investment in current assets and the financing of current assets. 
E)  Both the size of the firm's investment in current assets and the financing of fixed assets. 
A)  the size of the firm's investment in current assets. 
B)  the financing of current assets. 
C)  the financing of fixed assets. 
D)  Both the size of the firm's investment in current assets and the financing of current assets. 
E)  Both the size of the firm's investment in current assets and the financing of fixed assets.

Question 15

Which one of the following will decrease the operating cycle?

Accepted Answer

A)  Paying accounts payable faster 
B)  Discontinuing the discount given for early payment of an accounts receivable 
C)  Decreasing the inventory turnover rate 
D)  Collecting accounts receivable faster 
E)  Increasing the accounts payable turnover rate 
A)  Paying accounts payable faster 
B)  Discontinuing the discount given for early payment of an accounts receivable 
C)  Decreasing the inventory turnover rate 
D)  Collecting accounts receivable faster 
E)  Increasing the accounts payable turnover rate

Question 16

If your accounts receivable period is 30 days,you will collect payment for your _____ sales during the second quarter of a calendar year.

Accepted Answer

A)  January and February 
B)  January, February and March 
C)  February and March 
D)  February, March and April 
E)  March, April and May 
A)  January and February 
B)  January, February and March 
C)  February and March 
D)  February, March and April 
E)  March, April and May

Question 17

Weisbro and Sons purchases its inventory one quarter prior to the quarter of sale. The purchase price is 60% of the sales price. The accounts payable period is 60 days. The accounts payable balance at the beginning of quarter one is $27,500. What is the amount of the expected disbursements for quarter two given the following expected quarterly sales? Assume that a year has 360 days.

Accepted Answer

A)  $19,200 
B)  $20,400 
C)  $22,000 
D)  $25,200 
E)  $32,000 
A)  $19,200 
B)  $20,400 
C)  $22,000 
D)  $25,200 
E)  $32,000

Question 18

Yale Stores had a beginning accounts payable balance of $56,900 and an ending accounts payable balance of $62,800. Sales for the period were $670,000 and costs of goods sold were $418,000. What is the payables turnover rate?

Accepted Answer

A)  6.98 times 
B)  7.35 times 
C)  8.13 times 
D)  11.19 times 
E)  11.78 times 
A)  6.98 times 
B)  7.35 times 
C)  8.13 times 
D)  11.19 times 
E)  11.78 times

Question 19

Bilt Rite,Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000. How long on average does it take the firm to collect its receivables?

Accepted Answer

A)  13.76 days 
B)  14.09 days 
C)  21.07 days 
D)  25.98 days 
E)  26.52 days 
A)  13.76 days 
B)  14.09 days 
C)  21.07 days 
D)  25.98 days 
E)  26.52 days

Question 20

If the average accounts receivable that a firm holds decreases without any decrease in credit sales,the operating cycle will:

Accepted Answer

A)  stay the same because of no sales change. 
B)  stay the same because cash collections are sooner, and it will affect the cash cycle only. 
C)  decrease because days' sales outstanding decreases. 
D)  stay the same because accounts receivable are not in the operating cycle. 
E)  have an unknown effect. 
A)  stay the same because of no sales change. 
B)  stay the same because cash collections are sooner, and it will affect the cash cycle only. 
C)  decrease because days' sales outstanding decreases. 
D)  stay the same because accounts receivable are not in the operating cycle. 
E)  have an unknown effect.

Exam 26: Short-Term Finance and Planning

Which of the following is not included in current liabilities?

Which one of the following managers is most likely in charge of establishing the accounts receivable policy?

Your firm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year,your inventory was $31,000. At the end of the year,the inventory balance was $33,000. What is the inventory turnover rate?

The inventory turnover for the Lambkin Company was 8 times and its days sales in receivables was 55. What is the operating cycle for Lambkin given a 365-day year?

A short-term loan secured by the borrower's inventory,either directly or via an intermediary,is called a(n):

A firm currently has a 43 day cash cycle. Assume that the firm changes its operations such that it increases its receivables period by 2 days,decreases its inventory period by 1 day and increases its payables period by 3 days. What will the length of the cash cycle be after these changes?

Which one of the following statements is correct concerning the cash cycle?

In working capital management,there are some actions that increase or decrease cash. What are some of the items that increase and decrease the cash account,respectively?

A flexible short-term financial policy:

A type of short-term loan where the borrower sells its receivables to the lender up-front,but at a discount to face value,is called:

Which of the following are uses of cash? I. marketable securities are sold. II. the amount of inventory on hand is increased. III. the firm takes out a long-term bank loan. IV. payments are paid on accounts payable.

The short-term financial policy that a firm adopts will be reflected in:

Which one of the following will decrease the operating cycle?

If your accounts receivable period is 30 days,you will collect payment for your _____ sales during the second quarter of a calendar year.

Yale Stores had a beginning accounts payable balance of $56,900 and an ending accounts payable balance of $62,800. Sales for the period were $670,000 and costs of goods sold were $418,000. What is the payables turnover rate?

Bilt Rite,Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000. How long on average does it take the firm to collect its receivables?

If the average accounts receivable that a firm holds decreases without any decrease in credit sales,the operating cycle will:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: The Arbitrage Pricing Theory

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Cash Management

Credit and Inventory Management

Mergers, Acquisitions, and Divestitures

Financial Distress

International Corporate Finance

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