Question 1

A short-term loan where the borrower pledges its accounts receivable as security but is still responsible for any uncollectible account is referred to as

Accepted Answer

A) a compensating balance. 
B) a letter of credit. 
C) an assignment. 
D) factoring. 
E) a repurchase. 
A) a compensating balance. 
B) a letter of credit. 
C) an assignment. 
D) factoring. 
E) a repurchase.

Question 2

Baker Industries has a 30-day accounts receivable period.The estimated quarterly sales for this year,starting with the first quarter,are $1,450,$1,620,$1,740,and $2,250,respectively.How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.

Accepted Answer

A) $2,010 
B) $1,980 
C) $2,080 
D) $1,960 
E) $2,120 
A) $2,010 
B) $1,980 
C) $2,080 
D) $1,960 
E) $2,120

Question 3

The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

Accepted Answer

A) 74.07 days 
B) 93.45 days 
C) 79.69 days 
D) 100.86 days 
E) 89.85 days 
A) 74.07 days 
B) 93.45 days 
C) 79.69 days 
D) 100.86 days 
E) 89.85 days

Question 4

Birds Unlimited has a 45-day accounts payable period.The firm has expected sales for Quarters 1 through 4 of next year of $2,240,$2,650,$2,820,and $2,700,respectively.The cost of goods sold for a quarter is equal to 58 percent of the next quarter's sales.What is the amount of the projected cash disbursements for accounts payable for Quarter 3? Assume a 360-day year.

Accepted Answer

A) $2,825.50 
B) $1,600.80 
C) $1,690.30 
D) $1,725.50 
E) $2,760.00 
A) $2,825.50 
B) $1,600.80 
C) $1,690.30 
D) $1,725.50 
E) $2,760.00

Question 5

Upstate Farms factors its accounts receivable immediately at a discount of 2.5 percent.The average collection period is 39 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

Accepted Answer

A) 29.97% 
B) 26.74 % 
C) 30.78% 
D) 27.90% 
E) 28.33% 
A) 29.97% 
B) 26.74 % 
C) 30.78% 
D) 27.90% 
E) 28.33%

Question 6

Which one of the following will increase the cash cycle?

Accepted Answer

A) Increasing the cash discounts given to customers who pay their accounts early 
B) Having a larger percentage of customers paying with cash instead of credit 
C) Paying your suppliers earlier to receive the discount they offer 
D) Buying less raw materials to have on hand 
E) Ordering raw materials inventory only when you need it rather than ahead of time 
A) Increasing the cash discounts given to customers who pay their accounts early 
B) Having a larger percentage of customers paying with cash instead of credit 
C) Paying your suppliers earlier to receive the discount they offer 
D) Buying less raw materials to have on hand 
E) Ordering raw materials inventory only when you need it rather than ahead of time

Question 7

Toni's has a net cash inflow,excluding long-term financing expenses,for the quarter of $418.02.The beginning cash balance is $187.40.The firm has $546 in short-term debt with a quarterly interest rate of 1.2 percent.New company policy is to maintain a minimum cash balance of $140.How much does the firm need to borrow or how much can it repay on its loan to have a zero cumulative surplus for the quarter?

Accepted Answer

A) Borrow $458.87 
B) Borrow $276.69 
C) Repay $465.42 
D) Repay $458.87 
E) Repay $308.19 
A) Borrow $458.87 
B) Borrow $276.69 
C) Repay $465.42 
D) Repay $458.87 
E) Repay $308.19

Question 8

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

Accepted Answer

A) 52.31 days 
B) 76.90 days 
C) 65.29 days 
D) 70.78 days 
E) 43.18 days 
A) 52.31 days 
B) 76.90 days 
C) 65.29 days 
D) 70.78 days 
E) 43.18 days

Question 9

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

Accepted Answer

A) increase the operating cycle. 
B) shorten the accounts payable period. 
C) lengthen the accounts receivable period. 
D) decrease the cash cycle. 
E) decrease the inventory turnover rate. 
A) increase the operating cycle. 
B) shorten the accounts payable period. 
C) lengthen the accounts receivable period. 
D) decrease the cash cycle. 
E) decrease the inventory turnover rate.

Question 10

A firm has an inventory turnover rate of 15.2,a receivables turnover rate of 16.8,and a payables turnover rate of 12.7.How long is the operating cycle?

Accepted Answer

A) 39.19 days 
B) 45.74 days 
C) 42.87 days 
D) 33.08 days 
E) 53.37 days 
A) 39.19 days 
B) 45.74 days 
C) 42.87 days 
D) 33.08 days 
E) 53.37 days

Question 11

Snow Mountain Resort had a beginning cash balance of $9,720 for the quarter.During the quarter,the firm had cash collections of $157,311,wages and other cash expenses of $67,900,payments on account of $57,412,and dividends paid of $2,500.The minimum cash balance was just set at $1,200.The beginning short-term debt is $28,000 with a quarterly interest rate of 1.4 percent.At quarter end,the cumulative surplus (deficit)is ________ and the ending short-term debt is ________.

Accepted Answer

A) $0; $0 
B) $0; $1,892 
C) $0; $9,627 
D) $1,892; $0 
E) $9,627; $0 
A) $0; $0 
B) $0; $1,892 
C) $0; $9,627 
D) $1,892; $0 
E) $9,627; $0

Question 12

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

Accepted Answer

A) 114.67 days 
B) 105.21 days 
C) 84.56 days 
D) 100.41 days 
E) 121.59 days 
A) 114.67 days 
B) 105.21 days 
C) 84.56 days 
D) 100.41 days 
E) 121.59 days

Question 13

A prearranged credit agreement with a bank typically open for two or more years is called a

Accepted Answer

A) letter of credit. 
B) revolving credit arrangement. 
C) compensating balance. 
D) factored loan. 
E) cleanup loan. 
A) letter of credit. 
B) revolving credit arrangement. 
C) compensating balance. 
D) factored loan. 
E) cleanup loan.

Question 14

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.Assume all other disbursements are also equal throughout the year.Assume a 360-day year.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 15

A compensating balance
I.is required when a firm acquires bank financing other than a line of credit.
II.increases the cost of short-term bank financing.
III.represents an opportunity cost to the lending institution.
IV.is often used as a means of paying for banking services received.

Accepted Answer

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

Question 16

A type of short-term loan where the borrower sells its accounts receivables to the lender at a discount to face value is called

Accepted Answer

A) a compensating balance. 
B) an assignment. 
C) a letter of credit. 
D) factoring. 
E) a bond. 
A) a compensating balance. 
B) an assignment. 
C) a letter of credit. 
D) factoring. 
E) a bond.

Question 17

A firm currently has a 29.3-day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2.7 days,increases its inventory period by 1.4 days,and decreases its payables period by 2.4 days.What will the length of the cash cycle be after these changes?

Accepted Answer

A) 32.5 days 
B) 33.2 days 
C) 35.6 days 
D) 30.4 days 
E) 39.1 days 
A) 32.5 days 
B) 33.2 days 
C) 35.6 days 
D) 30.4 days 
E) 39.1 days

Question 18

Dwyer Metals has an inventory turnover of 16 and an accounts receivable turnover of 10.The accounts payable period is 51 days.What is the length of the operating cycle?

Accepted Answer

A) 59.31 days 
B) 62.57 days 
C) 51.84 days 
D) 65.03 days 
E) 52.79 days 
A) 59.31 days 
B) 62.57 days 
C) 51.84 days 
D) 65.03 days 
E) 52.79 days

Question 19

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

Accepted Answer

A) The cash cycle is equal to the operating cycle minus the inventory period. 
B) The most desirable cash cycle is the one that has a small positive value. 
C) Granting credit to slower paying customers tends to decrease the cash cycle. 
D) The cash cycle plus the accounts receivable period is equal to the operating cycle. 
E) A negative cash cycle is actually preferable to a positive cash cycle. 
A) The cash cycle is equal to the operating cycle minus the inventory period. 
B) The most desirable cash cycle is the one that has a small positive value. 
C) Granting credit to slower paying customers tends to decrease the cash cycle. 
D) The cash cycle plus the accounts receivable period is equal to the operating cycle. 
E) A negative cash cycle is actually preferable to a positive cash cycle.

Question 20

Which one of the following statements is correct?

Accepted Answer

A) A farmer generally uses a type of financing that employs trust receipts to provide financing during the growing season. 
B) Floor plan arrangements are most applicable to large,easily identifiable types of inventory. 
C) A drug store is more apt to have a financing arrangement involving trust receipts than one involving a blanket lien. 
D) A third-party inventory manager is generally involved with the lender and the borrower in a floor plan arrangement. 
E) A direct loan from a bank is generally less expensive than a loan involving commercial paper. 
A) A farmer generally uses a type of financing that employs trust receipts to provide financing during the growing season. 
B) Floor plan arrangements are most applicable to large,easily identifiable types of inventory. 
C) A drug store is more apt to have a financing arrangement involving trust receipts than one involving a blanket lien. 
D) A third-party inventory manager is generally involved with the lender and the borrower in a floor plan arrangement. 
E) A direct loan from a bank is generally less expensive than a loan involving commercial paper.

A short-term loan where the borrower pledges its accounts receivable as security but is still responsible for any uncollectible account is referred to as

Baker Industries has a 30-day accounts receivable period.The estimated quarterly sales for this year,starting with the first quarter,are $1,450,$1,620,$1,740,and $2,250,respectively.How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.

The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

Upstate Farms factors its accounts receivable immediately at a discount of 2.5 percent.The average collection period is 39 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

Which one of the following will increase the cash cycle?

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

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

A firm has an inventory turnover rate of 15.2,a receivables turnover rate of 16.8,and a payables turnover rate of 12.7.How long is the operating cycle?

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

A prearranged credit agreement with a bank typically open for two or more years is called a

A compensating balance I.is required when a firm acquires bank financing other than a line of credit. II.increases the cost of short-term bank financing. III.represents an opportunity cost to the lending institution. IV.is often used as a means of paying for banking services received.

A type of short-term loan where the borrower sells its accounts receivables to the lender at a discount to face value is called

A firm currently has a 29.3-day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2.7 days,increases its inventory period by 1.4 days,and decreases its payables period by 2.4 days.What will the length of the cash cycle be after these changes?

Dwyer Metals has an inventory turnover of 16 and an accounts receivable turnover of 10.The accounts payable period is 51 days.What is the length of the operating cycle?

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

Which one of the following statements is correct?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 18: Short-Term Finance and Planning

A short-term loan where the borrower pledges its accounts receivable as security but is still responsible for any uncollectible account is referred to as

Baker Industries has a 30-day accounts receivable period.The estimated quarterly sales for this year,starting with the first quarter,are $1,450,$1,620,$1,740,and $2,250,respectively.How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.

The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

Upstate Farms factors its accounts receivable immediately at a discount of 2.5 percent.The average collection period is 39 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

Which one of the following will increase the cash cycle?

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

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

A firm has an inventory turnover rate of 15.2,a receivables turnover rate of 16.8,and a payables turnover rate of 12.7.How long is the operating cycle?

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

A prearranged credit agreement with a bank typically open for two or more years is called a

A compensating balance I.is required when a firm acquires bank financing other than a line of credit. II.increases the cost of short-term bank financing. III.represents an opportunity cost to the lending institution. IV.is often used as a means of paying for banking services received.

A type of short-term loan where the borrower sells its accounts receivables to the lender at a discount to face value is called

A firm currently has a 29.3-day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2.7 days,increases its inventory period by 1.4 days,and decreases its payables period by 2.4 days.What will the length of the cash cycle be after these changes?

Dwyer Metals has an inventory turnover of 16 and an accounts receivable turnover of 10.The accounts payable period is 51 days.What is the length of the operating cycle?

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

Which one of the following statements is correct?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters