Question 1

For a levered firm,an additional 3-day delay in paying suppliers will

Accepted Answer

A) reduce the firm's long-term external financing need. 
B) increase the firm's stock-out costs. 
C) increase the cash cycle by 3 days. 
D) reduce the operating cycle by 3 days. 
E) not affect the cash cycle. 
A) reduce the firm's long-term external financing need. 
B) increase the firm's stock-out costs. 
C) increase the cash cycle by 3 days. 
D) reduce the operating cycle by 3 days. 
E) not affect the cash cycle.

Question 2

D&M sells its inventory in 67 days on average.Their customers generally charge their purchases on a credit card with payment being received in 2 days.The company takes 61 days on average to pay for its purchases.Given this information,what is the length of the company's cash cycle?

Accepted Answer

A) 42 days 
B) 36 days 
C) 13 days 
D) 17 days 
E) 8 days 
A) 42 days 
B) 36 days 
C) 13 days 
D) 17 days 
E) 8 days

Question 3

A supplier offers you credit terms of 2/10,net 45.What is the cost of forgoing the discount on a purchase of $318,600? Assume a 365-day year.

Accepted Answer

A) 20.41% 
B) 21.08% 
C) 24.83% 
D) 22.69% 
E) 23.45% 
A) 20.41% 
B) 21.08% 
C) 24.83% 
D) 22.69% 
E) 23.45%

Question 4

The total sum of the carrying costs and the shortage costs will be lowest at the point where

Accepted Answer

A) both the carrying costs and the shortage costs are minimized. 
B) the carrying costs exceed the shortage costs. 
C) the carrying costs equal the shortage costs. 
D) both the carrying costs and the shortage costs are maximized. 
E) the shortage costs exceed the carrying costs. 
A) both the carrying costs and the shortage costs are minimized. 
B) the carrying costs exceed the shortage costs. 
C) the carrying costs equal the shortage costs. 
D) both the carrying costs and the shortage costs are maximized. 
E) the shortage costs exceed the carrying costs.

Question 5

A supplier offers you credit terms of 1/5,net 20.What is the cost of forgoing the discount on a purchase of $1,250? Assume a 365-day year.

Accepted Answer

A) 34.21% 
B) 37.79% 
C) 29.03% 
D) 32.33% 
E) 44.32% 
A) 34.21% 
B) 37.79% 
C) 29.03% 
D) 32.33% 
E) 44.32%

Question 6

Bruceton Farms currently has an operating cycle of 76.3 days.The firm is analyzing some operational changes that are expected to decrease the accounts receivable period by 2.8 days and decrease the inventory period by 3.1 days.The accounts payable turnover rate is expected to increase from seven to eight times per year.If all of these changes are adopted,what will be the firm's new operating cycle?

Accepted Answer

A) 68.7 days 
B) 61.3 days 
C) 54.9 days 
D) 70.4 days 
E) 76.2 days 
A) 68.7 days 
B) 61.3 days 
C) 54.9 days 
D) 70.4 days 
E) 76.2 days

Question 7

A restrictive short-term financial policy,as compared to a more flexible policy,tends to increase

Accepted Answer

A) the probability that a firm will face a cash-out situation. 
B) the sales of a firm due to the firm's credit availability and terms. 
C) sales due the large amount of inventory on hand. 
D) accounts receivable. 
E) the ability of a firm to charge premium prices. 
A) the probability that a firm will face a cash-out situation. 
B) the sales of a firm due to the firm's credit availability and terms. 
C) sales due the large amount of inventory on hand. 
D) accounts receivable. 
E) the ability of a firm to charge premium prices.

Question 8

Which one of the following will increase the net working capital of a firm? Assume the current ratio is positive.

Accepted Answer

A) Selling a fixed asset 
B) Selling inventory at cost for cash 
C) Making a payment on a long-term debt 
D) Buying inventory on credit 
E) Paying an accounts payable 
A) Selling a fixed asset 
B) Selling inventory at cost for cash 
C) Making a payment on a long-term debt 
D) Buying inventory on credit 
E) Paying an accounts payable

Question 9

Martinique's Boutique has a 45-day collection period.Sales for the next four quarters are estimated at $1,500,$1,600,$2,100,and $1,900,respectively,starting with the first quarter of the year.Given this information,which one of the following statements is correct? Assume a 360-day year.

Accepted Answer

A) The firm will collect $1,575 in Quarter 2. 
B) The accounts receivable balance at the beginning of Quarter 4 will be $950. 
C) The firm will collect $750 from Quarter 2 sales in Quarter 3. 
D) The firm will have an accounts receivable balance of $950 at the end of the year. 
E) The firm will collect a total of $2,100 in Quarter 4. 
A) The firm will collect $1,575 in Quarter 2. 
B) The accounts receivable balance at the beginning of Quarter 4 will be $950. 
C) The firm will collect $750 from Quarter 2 sales in Quarter 3. 
D) The firm will have an accounts receivable balance of $950 at the end of the year. 
E) The firm will collect a total of $2,100 in Quarter 4.

Question 10

A flexible short-term financial policy

Accepted Answer

A) increases the likelihood that a firm will face financial distress. 
B) increases the probability that a firm will earn high returns on all of its assets. 
C) advocates a smaller investment in net working capital than a restrictive policy does. 
D) utilizes short-term financing to fund all of the firm's assets. 
E) incurs an opportunity cost due to the rate of return that applies to short-term assets. 
A) increases the likelihood that a firm will face financial distress. 
B) increases the probability that a firm will earn high returns on all of its assets. 
C) advocates a smaller investment in net working capital than a restrictive policy does. 
D) utilizes short-term financing to fund all of the firm's assets. 
E) incurs an opportunity cost due to the rate of return that applies to short-term assets.

Question 11

Your firm collects 20 percent of sales in the month of sale,65 percent of sales in the month following the month of sale,and 13 percent of sales in the second month following the month of sale.The remainder of the sales are uncollectible.Given this,you will collect ________ sales during the month of May.

Accepted Answer

A) 65 percent of May 
B) 20 percent of March 
C) 13 percent of May 
D) 65 percent of March 
E) 13 percent of March 
A) 65 percent of May 
B) 20 percent of March 
C) 13 percent of May 
D) 65 percent of March 
E) 13 percent of March

Question 12

Jupiter stores had a Quarter 2 beginning cash balance of $647.Sales for Quarters 1 through 3 are estimated at $800,$950,and $1,200,respectively.The cost of goods sold is equal to 59 percent of sales.Goods are purchased one quarter prior to the month of sale.The accounts payable period is 30 days,and the accounts receivable period is 15 days.The firm had quarterly cash expenses of $210.What was the cash balance at the end of Quarter 2? Assume a 360-day year.

Accepted Answer

A) $674.47 
B) $666.67 
C) $703.17 
D) $719.39 
E) $680.00 
A) $674.47 
B) $666.67 
C) $703.17 
D) $719.39 
E) $680.00

Question 13

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

Accepted Answer

A) increase due to the increased receivables turnover rate. 
B) decrease because the number of days' sales in receivables will decrease. 
C) remain constant because credit sales are constant. 
D) remain constant because the accounts receivable and inventory periods will be constant. 
E) remain constant because cash collections affect the cash cycle,not the operating cycle. 
A) increase due to the increased receivables turnover rate. 
B) decrease because the number of days' sales in receivables will decrease. 
C) remain constant because credit sales are constant. 
D) remain constant because the accounts receivable and inventory periods will be constant. 
E) remain constant because cash collections affect the cash cycle,not the operating cycle.

Question 14

Weisbro and Sons purchases its inventory one quarter prior to the quarter of sale.The purchase price is 57 percent of the sales price.The accounts payable period is 60 days.The accounts payable balance at the beginning of Quarter 1 is $27,500.Sales for Quarters 1 through 4 are expected to be $46,400,$51,900,$57,800,and $62,500,respectively.What is the amount of the expected disbursements for Quarter 3? Assume a 360-day year.

Accepted Answer

A) $29,202 
B) $30,451 
C) $33,839 
D) $28,800 
E) $31,407 
A) $29,202 
B) $30,451 
C) $33,839 
D) $28,800 
E) $31,407

Question 15

Pat's Place has sales of $613,700 and cost of goods sold of $338,514.At the beginning of the year,inventory was $56,509.At the end of the year,the inventory balance was $52,411.What is the inventory turnover rate?

Accepted Answer

A) 5.23 times 
B) 7.56 times 
C) 6.22 times 
D) 5.60 times 
E) 6.87 times 
A) 5.23 times 
B) 7.56 times 
C) 6.22 times 
D) 5.60 times 
E) 6.87 times

Question 16

Which one of these managers is most apt to post customer payments to their accounts?

Accepted Answer

A) Credit manager 
B) Controller 
C) Cash manager 
D) Marketing manager 
E) Payables manager 
A) Credit manager 
B) Controller 
C) Cash manager 
D) Marketing manager 
E) Payables manager

Question 17

Southern Markets has an accounts receivable period of 30 days.In the first quarter of a calendar year,the firm's accounts receivable collections will equal its credit sales for the months of:

Accepted Answer

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

Question 18

A restrictive short-term financial policy is most associated with both

Accepted Answer

A) liberal credit terms and large investments in marketable securities. 
B) minimal cash balances and large investments in marketable securities. 
C) large investments in inventory and accounts receivable. 
D) minimal cash balances and credit sales. 
E) high credit sales and high cash balances. 
A) liberal credit terms and large investments in marketable securities. 
B) minimal cash balances and large investments in marketable securities. 
C) large investments in inventory and accounts receivable. 
D) minimal cash balances and credit sales. 
E) high credit sales and high cash balances.

Question 19

Buster's had a beginning cash balance of $2,780 for the quarter.During the quarter,the firm had cash collections of $41,309,wages and other cash expenses of $18,800,payments on account of $21,308,and dividends paid of $1,200.The beginning short-term debt is $6,800 with a quarterly interest rate of 2 percent.The firm just adopted a new policy which sets the minimum cash balance at $600.At quarter end,the cumulative surplus (deficit)is ________ and the ending short-term debt is ________.

Accepted Answer

A) $0; $6,800 
B) $0; $4,755 
C) $0; $4,891 
D) $1,892; $4,891 
E) $2,045; $4,755 
A) $0; $6,800 
B) $0; $4,755 
C) $0; $4,891 
D) $1,892; $4,891 
E) $2,045; $4,755

Question 20

Which one of these managers is most apt to determine which supplier should be used as the source of a production material?

Accepted Answer

A) Marketing manager 
B) Cash manager 
C) Purchasing manager 
D) Controller 
E) Production manager 
A) Marketing manager 
B) Cash manager 
C) Purchasing manager 
D) Controller 
E) Production manager

For a levered firm,an additional 3-day delay in paying suppliers will

D&M sells its inventory in 67 days on average.Their customers generally charge their purchases on a credit card with payment being received in 2 days.The company takes 61 days on average to pay for its purchases.Given this information,what is the length of the company's cash cycle?

A supplier offers you credit terms of 2/10,net 45.What is the cost of forgoing the discount on a purchase of $318,600? Assume a 365-day year.

The total sum of the carrying costs and the shortage costs will be lowest at the point where

A supplier offers you credit terms of 1/5,net 20.What is the cost of forgoing the discount on a purchase of $1,250? Assume a 365-day year.

A restrictive short-term financial policy,as compared to a more flexible policy,tends to increase

Which one of the following will increase the net working capital of a firm? Assume the current ratio is positive.

Martinique's Boutique has a 45-day collection period.Sales for the next four quarters are estimated at $1,500,$1,600,$2,100,and $1,900,respectively,starting with the first quarter of the year.Given this information,which one of the following statements is correct? Assume a 360-day year.

A flexible short-term financial policy

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

Pat's Place has sales of $613,700 and cost of goods sold of $338,514.At the beginning of the year,inventory was $56,509.At the end of the year,the inventory balance was $52,411.What is the inventory turnover rate?

Which one of these managers is most apt to post customer payments to their accounts?

Southern Markets has an accounts receivable period of 30 days.In the first quarter of a calendar year,the firm's accounts receivable collections will equal its credit sales for the months of:

A restrictive short-term financial policy is most associated with both

Which one of these managers is most apt to determine which supplier should be used as the source of a production material?

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

For a levered firm,an additional 3-day delay in paying suppliers will

D&M sells its inventory in 67 days on average.Their customers generally charge their purchases on a credit card with payment being received in 2 days.The company takes 61 days on average to pay for its purchases.Given this information,what is the length of the company's cash cycle?

A supplier offers you credit terms of 2/10,net 45.What is the cost of forgoing the discount on a purchase of $318,600? Assume a 365-day year.

The total sum of the carrying costs and the shortage costs will be lowest at the point where

A supplier offers you credit terms of 1/5,net 20.What is the cost of forgoing the discount on a purchase of $1,250? Assume a 365-day year.

A restrictive short-term financial policy,as compared to a more flexible policy,tends to increase

Which one of the following will increase the net working capital of a firm? Assume the current ratio is positive.

Martinique's Boutique has a 45-day collection period.Sales for the next four quarters are estimated at $1,500,$1,600,$2,100,and $1,900,respectively,starting with the first quarter of the year.Given this information,which one of the following statements is correct? Assume a 360-day year.

A flexible short-term financial policy

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

Pat's Place has sales of $613,700 and cost of goods sold of $338,514.At the beginning of the year,inventory was $56,509.At the end of the year,the inventory balance was $52,411.What is the inventory turnover rate?

Which one of these managers is most apt to post customer payments to their accounts?

Southern Markets has an accounts receivable period of 30 days.In the first quarter of a calendar year,the firm's accounts receivable collections will equal its credit sales for the months of:

A restrictive short-term financial policy is most associated with both

Which one of these managers is most apt to determine which supplier should be used as the source of a production material?

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