Exam 26: Short-Term Finance and Planning

Your firm collects 30% of sales in the month of sale,55% of sales in the month following the month of sale and 13% of sales in the second month following the month of sale. Given this,you will collect _____ sales during the month of June.

Your firm has a net cash inflow for the quarter of $60. The beginning cash balance is $35. Company policy is to maintain a minimum cash balance of $15 and borrow only the amount that is necessary to maintain that balance. How much does your firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus?

Jordan and Sons has an inventory period of 33 days,an accounts payable period of 41 days and an accounts receivable period of 27 days. Management is considering offering a 5% discount if its credit customers pay for their purchases within 10 days. If the new discount is offered the accounts receivable period is expected to decline by 13 days. If the new discount is offered,the operating cycle will decrease from _____ days to _____ days.

Which of the following are associated with a restrictive short-term financial policy? I. large investments in marketable securities II. liberal credit terms for customers III. minimal cash balances IV. minimal credit sales

Which of the following actions will tend to decrease the inventory period? I. discontinuing all slow-selling merchandise II. selling obsolete inventory below cost just to get rid of it III. buying raw materials only as they are needed in the manufacturing process IV. producing goods on demand versus for inventory

As the CFO of Jonathan's Auto Recycling,you plan to implement a system whereby customers who pay their bills on time will receive a 10% rebate on their purchases. Those who pay earlier than required will receive a 15% rebate. Explain the impact of this proposal on the firm.

A flexible short-term financial policy:

Costs of the firm that rise with increased levels of investment in its current assets are called _____ costs.

The cash cycle is defined as the time between:

Blue Moon Corporation's Balance Sheet and Income Statement as shown below: The average inventory for the Blue Moon Corporation in 2011 is __________.

Sources of cash do not include:

The length of time between the acquisition of inventory and the collection of cash from receivables is called the:

Which of the following is not included in current assets?

Your bank offers you a $70,000 line of credit with an interest rate of 2.75% per quarter. The loan agreement also requires that 5% of the unused portion of the credit line be deposited in a non-interest bearing account as a compensating balance. Your short-term investments are paying ½ of 1% per month. What is your effective annual interest rate on this arrangement if you do not borrow any money on this credit line during the year? Assume that both the funds you borrow and the funds you invest use compound interest.

A restrictive short-term financial policy tends to:

As of the beginning of the quarter,you have a cash balance of $250. During the quarter you pay your suppliers $310. Your accounts receivable collections are $420. You also pay an interest payment of $30 and a tax bill of $180. In addition,you borrow $75. What is your cash balance at the end of the quarter?

Which of the following increases cash?

ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The firm is now changing its policy and only producing a product when it receives an actual order from a customer. All else equal,this change will:

Birds Unlimited has a 45 day accounts payable period. The firm has expected sales of $1,800,$2,100,$2,400 and $2,800,respectively,by quarter for the next calendar year. The cost of goods sold for a quarter is equal to 65% of the next quarter sales. What is the amount of the projected cash disbursements for accounts payable for Quarter 2 of the next year? Assume that a year has 360 days.

A use of cash can be determined by: