Question 1

If the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare ________________.

Accepted Answer

A)  A detailed analysis of accounts receivable 
B)  An aging schedule 
C)  A credit analysis 
D)  An analysis of the cash cycle 
A)  A detailed analysis of accounts receivable 
B)  An aging schedule 
C)  A credit analysis 
D)  An analysis of the cash cycle

Question 2

KJ Enterprises estimates that it takes, on average, 3 days for their customers' payments to reach them, 1 day for the payments to be processed and deposited by their bookkeeping department, and 2 more days for the checks to clear once they're deposited. What is their collection float?

Accepted Answer

A)  1 days 
B)  2 days 
C)  3 days 
D)  6 days 
A)  1 days 
B)  2 days 
C)  3 days 
D)  6 days

Question 3

Why do firms offer customers discounts for paying early?

Accepted Answer

A)  If customers pay early, the firm increases the likelihood of being paid. 
B)  If customers pay early, the firm's cash cycle is shortened. 
C)  If customers pay early, the firm improves its credit policy. 
D)  All of the above 
A)  If customers pay early, the firm increases the likelihood of being paid. 
B)  If customers pay early, the firm's cash cycle is shortened. 
C)  If customers pay early, the firm improves its credit policy. 
D)  All of the above

Question 4

Suppose that Sam Industries has annual sales of $2 million, cost of goods sold of $950,000, average inventories of $45,000, and average accounts receivable of $90,000. Assuming that all of Sam's sales are on credit, what will be the firm's operating cycle?

Accepted Answer

A)  0.85 
B)  16.43 
C)  17.29 
D)  33.72 
A)  0.85 
B)  16.43 
C)  17.29 
D)  33.72

Question 5

CM Enterprises estimates that it takes, on average, 7 days for their customers' payments to reach them, 1 day for the payments to be processed and deposited by their bookkeeping department, and 3 more days for the checks to clear once they're deposited. What is their collection float?

Accepted Answer

A)  7 days 
B)  8 days 
C)  10 days 
D)  11 days 
A)  7 days 
B)  8 days 
C)  10 days 
D)  11 days

Question 6

All of the following are the different types of float the firm may experience in its collections except _____________.

Accepted Answer

A)  Mail float 
B)  Availability float 
C)  Check kiting float 
D)  Processing float 
A)  Mail float 
B)  Availability float 
C)  Check kiting float 
D)  Processing float

Question 7

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease, how will the firm's needs for net working capital react?

Accepted Answer

A)  Net working capital would increase. 
B)  Net working capital would decrease. 
C)  There would be no change in net working capital. 
D)  Net working capital would first decrease, then increase slowly over time. 
A)  Net working capital would increase. 
B)  Net working capital would decrease. 
C)  There would be no change in net working capital. 
D)  Net working capital would first decrease, then increase slowly over time.

Question 8

Happy Feet would like to maintain their cash account at a minimum level of $75,000, but expects the standard deviation in net daily cash flows to be $5,000; the effective annual rate on marketable securities to be 7 percent per year; and the trading cost per sale or purchase of marketable securities to be $150 per transaction. What will be their optimal upper cash limit?

Accepted Answer

A)  $80,000.00 
B)  $99,755.64 
C)  $76,593.42 
D)  $149,266.92 
A)  $80,000.00 
B)  $99,755.64 
C)  $76,593.42 
D)  $149,266.92

Question 9

If a firm has a cash cycle of 75 days and an operating cycle of 120 days, what is its payables turnover?

Accepted Answer

A)  8.11x 
B)  7.19x 
C)  5.97x 
D)  6.73x 
A)  8.11x 
B)  7.19x 
C)  5.97x 
D)  6.73x

If the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare ________________.

KJ Enterprises estimates that it takes, on average, 3 days for their customers' payments to reach them, 1 day for the payments to be processed and deposited by their bookkeeping department, and 2 more days for the checks to clear once they're deposited. What is their collection float?

Why do firms offer customers discounts for paying early?

Suppose that Sam Industries has annual sales of $2 million, cost of goods sold of $950,000, average inventories of $45,000, and average accounts receivable of $90,000. Assuming that all of Sam's sales are on credit, what will be the firm's operating cycle?

CM Enterprises estimates that it takes, on average, 7 days for their customers' payments to reach them, 1 day for the payments to be processed and deposited by their bookkeeping department, and 3 more days for the checks to clear once they're deposited. What is their collection float?

All of the following are the different types of float the firm may experience in its collections except _____________.

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease, how will the firm's needs for net working capital react?

If a firm has a cash cycle of 75 days and an operating cycle of 120 days, what is its payables turnover?

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 the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare ________________.

KJ Enterprises estimates that it takes, on average, 3 days for their customers' payments to reach them, 1 day for the payments to be processed and deposited by their bookkeeping department, and 2 more days for the checks to clear once they're deposited. What is their collection float?

Why do firms offer customers discounts for paying early?

Suppose that Sam Industries has annual sales of $2 million, cost of goods sold of $950,000, average inventories of $45,000, and average accounts receivable of $90,000. Assuming that all of Sam's sales are on credit, what will be the firm's operating cycle?

CM Enterprises estimates that it takes, on average, 7 days for their customers' payments to reach them, 1 day for the payments to be processed and deposited by their bookkeeping department, and 3 more days for the checks to clear once they're deposited. What is their collection float?

All of the following are the different types of float the firm may experience in its collections except _____________.

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease, how will the firm's needs for net working capital react?

If a firm has a cash cycle of 75 days and an operating cycle of 120 days, what is its payables turnover?

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