Question 1

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its average payment period?

Accepted Answer

A)  10 
B)  33 
C)  43 
D)  53 
A)  10 
B)  33 
C)  43 
D)  53

Question 2

Joe's Burgers would like to maintain their cash account at a minimum level of $300,000, but expects the standard deviation in net daily cash flows to be $20,000; the effective annual rate on marketable securities to be 5.2 percent per year; and the trading cost per sale or purchase of marketable securities to be $22.55 per transaction. What will be their optimal upper cash limit?

Accepted Answer

A)  $320,000.00 
B)  $336,492.68 
C)  $409,478.04 
D)  $1,009,478.04 
A)  $320,000.00 
B)  $336,492.68 
C)  $409,478.04 
D)  $1,009,478.04

Question 3

If a firm has a cash cycle of 25 days and an operating cycle of 80 days, what is its average payment period?

Accepted Answer

A)  25 
B)  80 
C)  55 
D)  105 
A)  25 
B)  80 
C)  55 
D)  105

Question 4

If a firm's inventory ratio increases, what will happen to the firm's operating cycle?

Accepted Answer

A)  It will increase. 
B)  It will decrease. 
C)  It will increase and then slowly decrease back to the initial level. 
D)  It will decrease and the slowly increase back to the initial level. 
A)  It will increase. 
B)  It will decrease. 
C)  It will increase and then slowly decrease back to the initial level. 
D)  It will decrease and the slowly increase back to the initial level.

Question 5

Operating cycle is measured as:

Accepted Answer

A)  Inventory Turns minus Average Collection Period 
B)  Inventory Turns plus Average Collection Period 
C)  Days' Sales in Inventory minus Average Collection Period 
D)  Days' Sales in Inventory plus Average Collection Period 
A)  Inventory Turns minus Average Collection Period 
B)  Inventory Turns plus Average Collection Period 
C)  Days' Sales in Inventory minus Average Collection Period 
D)  Days' Sales in Inventory plus Average Collection Period

Question 6

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity, the firm is said to follow a _______________.

Accepted Answer

A)  Seasonal-dependent financing policy 
B)  Relaxed financing policy 
C)  Restricted financing policy 
D)  Compromise financing policy 
A)  Seasonal-dependent financing policy 
B)  Relaxed financing policy 
C)  Restricted financing policy 
D)  Compromise financing policy

Question 7

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and

Accepted Answer

A)  opportunity costs 
B)  financing costs 
C)  safety costs 
D)  shortage costs 
A)  opportunity costs 
B)  financing costs 
C)  safety costs 
D)  shortage costs

Question 8

Why would a firm ever use short-term debt to finance permanent current assets?

Accepted Answer

A)  This would be illogical and is rarely observed. 
B)  This would occur if short-term rates were much lower than long-term rates. 
C)  This would only occur if the managers were very conservative. 
D)  None of these. 
A)  This would be illogical and is rarely observed. 
B)  This would occur if short-term rates were much lower than long-term rates. 
C)  This would only occur if the managers were very conservative. 
D)  None of these.

Question 9

This is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand.

Accepted Answer

A)  liquid current assets 
B)  safety stock 
C)  overnight securities 
D)  float 
A)  liquid current assets 
B)  safety stock 
C)  overnight securities 
D)  float

Question 10

Suppose that LilyMac Photography has annual sales of $290,000; cost of goods sold of $155,000; average inventories of $3,500; average accounts receivable of $21,000; and an average accounts payable balance of $10,000. Assuming that all of LilyMac's sales are on credit, what will be the firm's cash cycle?

Accepted Answer

A)  11.12 days 
B)  13.01 days 
C)  14.99 days 
D)  16.97 days 
A)  11.12 days 
B)  13.01 days 
C)  14.99 days 
D)  16.97 days

Question 11

If a firm has a cash cycle of 32 days and an operating cycle of 67 days, what is its payables turnover?

Accepted Answer

A)  5.45 
B)  10.43 
C)  11.41 
D)  35 
A)  5.45 
B)  10.43 
C)  11.41 
D)  35

Question 12

Which of the following is NOT one of the five basic elements of the kaizen approach of productivity improvement?

Accepted Answer

A)  teamwork 
B)  improved morale 
C)  quality circles 
D)  suggestions for personal discipline 
A)  teamwork 
B)  improved morale 
C)  quality circles 
D)  suggestions for personal discipline

Question 13

Which of the following current asset financing policies reflects the decision to finance the peaks of current assets with long-term debt and equity that provides the firm with a surplus of cash and marketable securities most of the time, except during peak asset demand?

Accepted Answer

A)  flexible financing policy 
B)  restrictive financing policy 
C)  compromise financing policy 
D)  alternative financing policy 
A)  flexible financing policy 
B)  restrictive financing policy 
C)  compromise financing policy 
D)  alternative financing policy

Question 14

Which of the following will decrease the operating cycle?

Accepted Answer

A)  The cash cycle decreases. 
B)  The days' sales in inventory decreases by 3 days but the average collection period increases by 2 days. 
C)  The average payment period increases. 
D)  All of these will decrease the operating cycle. 
A)  The cash cycle decreases. 
B)  The days' sales in inventory decreases by 3 days but the average collection period increases by 2 days. 
C)  The average payment period increases. 
D)  All of these will decrease the operating cycle.

Question 15

All of the following are examples of carrying costs except ______________.

Accepted Answer

A)  Rental payments on building where the business is located 
B)  The lost sale if the company runs out of a particular model 
C)  The opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets 
D)  All of these are examples of carrying costs 
A)  Rental payments on building where the business is located 
B)  The lost sale if the company runs out of a particular model 
C)  The opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets 
D)  All of these are examples of carrying costs

Question 16

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

Accepted Answer

A)  banker's paper 
B)  commercial paper 
C)  banker's acceptance 
D)  commercial acceptance 
A)  banker's paper 
B)  commercial paper 
C)  banker's acceptance 
D)  commercial acceptance

Question 17

BOGO Shoes would like to maintain their cash account at a minimum level of $100,000, but expects the standard deviation in net daily cash flows to be $7,000; the effective annual rate on marketable securities to be 6.5 percent per year; and the trading cost per sale or purchase of marketable securities to be $175 per transaction. What will be their optimal cash return point?

Accepted Answer

A)  $107,000 
B)  $133,374.63 
C)  $144,266.52 
D)  $101,859.65 
A)  $107,000 
B)  $133,374.63 
C)  $144,266.52 
D)  $101,859.65

Question 18

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its payables turnover?

Accepted Answer

A)  11.06 
B)  36.5 
C)  8.48 
D)  33 
A)  11.06 
B)  36.5 
C)  8.48 
D)  33

Question 19

Which of the following actions will cause a firm's net working capital to increase?

Accepted Answer

A)  The firm uses more trade credit. 
B)  The firm increases its inventory in anticipation of seasonal sales. 
C)  The firm pays off a short-term bank loan with cash. 
D)  All of these will cause a firm's net working capital to increase. 
A)  The firm uses more trade credit. 
B)  The firm increases its inventory in anticipation of seasonal sales. 
C)  The firm pays off a short-term bank loan with cash. 
D)  All of these will cause a firm's net working capital to increase.

Question 20

Suppose that Dunn Industries has annual sales of $2.5 million, cost of goods sold of $1,850,000, average inventories of $1,900,000, and average accounts receivable of $660,000. Assuming that all of Dunn's sales are on credit, what will be the firm's operating cycle?

Accepted Answer

A)  471.22 days 
B)  374.86 days 
C)  418.61 days 
D)  515.39 days 
A)  471.22 days 
B)  374.86 days 
C)  418.61 days 
D)  515.39 days

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its average payment period?

If a firm has a cash cycle of 25 days and an operating cycle of 80 days, what is its average payment period?

If a firm's inventory ratio increases, what will happen to the firm's operating cycle?

Operating cycle is measured as:

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity, the firm is said to follow a _______________.

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and

Why would a firm ever use short-term debt to finance permanent current assets?

This is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand.

If a firm has a cash cycle of 32 days and an operating cycle of 67 days, what is its payables turnover?

Which of the following is NOT one of the five basic elements of the kaizen approach of productivity improvement?

Which of the following current asset financing policies reflects the decision to finance the peaks of current assets with long-term debt and equity that provides the firm with a surplus of cash and marketable securities most of the time, except during peak asset demand?

Which of the following will decrease the operating cycle?

All of the following are examples of carrying costs except ______________.

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its payables turnover?

Which of the following actions will cause a firm's net working capital to increase?

Suppose that Dunn Industries has annual sales of $2.5 million, cost of goods sold of $1,850,000, average inventories of $1,900,000, and average accounts receivable of $660,000. Assuming that all of Dunn's sales are on credit, what will be the firm's operating cycle?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 14: Working Capital Management and Policies

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its average payment period?

If a firm has a cash cycle of 25 days and an operating cycle of 80 days, what is its average payment period?

If a firm's inventory ratio increases, what will happen to the firm's operating cycle?

Operating cycle is measured as:

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity, the firm is said to follow a _______________.

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and

Why would a firm ever use short-term debt to finance permanent current assets?

This is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand.

If a firm has a cash cycle of 32 days and an operating cycle of 67 days, what is its payables turnover?

Which of the following is NOT one of the five basic elements of the kaizen approach of productivity improvement?

Which of the following current asset financing policies reflects the decision to finance the peaks of current assets with long-term debt and equity that provides the firm with a surplus of cash and marketable securities most of the time, except during peak asset demand?

Which of the following will decrease the operating cycle?

All of the following are examples of carrying costs except ______________.

Which of the following is a short-term promissory note issued by a corporation, bearing the unconditional guarantee of a major bank?

If a firm has a cash cycle of 10 days and an operating cycle of 43 days, what is its payables turnover?

Which of the following actions will cause a firm's net working capital to increase?

Suppose that Dunn Industries has annual sales of $2.5 million, cost of goods sold of $1,850,000, average inventories of $1,900,000, and average accounts receivable of $660,000. Assuming that all of Dunn's sales are on credit, what will be the firm's operating cycle?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters