Question 1

An increase in current liabilities is a source of cash for the firm.

Accepted Answer

A) True 
 B)False

Question 2

The longer the firm's accounts payable period, the:

Accepted Answer

A)  longer the firm's cash conversion cycle. 
B)  shorter the firm's inventory period. 
C)  more the delay in the accounts receivable period. 
D) less the firm must invest in net working capital. 
A)  longer the firm's cash conversion cycle. 
B)  shorter the firm's inventory period. 
C)  more the delay in the accounts receivable period. 
D) less the firm must invest in net working capital.

Question 3

During the year the following changes were observed. I. Inventory period increased by 12 days.
II) Receivables period decreased by 6 days.
III) Accounts payable period increased by 4 days.
What is the net change in the cash conversion cycle?

Accepted Answer

A)  -10 days 
B)  +2 days 
C)  +10 days 
D) +14 days 
A)  -10 days 
B)  +2 days 
C)  +10 days 
D) +14 days

Question 4

Describe in general a firm's cash conversion cycle.

Accepted Answer

The cash conversion cycle is measured by

Question 5

How does the firm's sources and uses of cash relate to its need for short-term borrowing?

Accepted Answer

The starting point for short-term financ

Question 6

An increase in long-term assets is a source of cash.

Accepted Answer

A) True 
 B)False

Question 7

How do firms develop a short-term financial plan that meets their need for cash?

Accepted Answer

The search for the best short-term finan

Question 8

What are some of the major sources of short-term financing and how are interest rates commonly quoted on these types of loans?

Accepted Answer

Three major sources of short-term financ

Question 9

A firm sells its $1,000,000 of receivables to a factor for $960,000. What is the effective annual rate on this arrangement if the average collection period is one month?

Accepted Answer

A)  27.43%. 
B)  48.00%. 
C)  60.10%. 
D) 63.21%. 
A)  27.43%. 
B)  48.00%. 
C)  60.10%. 
D) 63.21%.

Question 10

A company that borrows $1 million long term and invests the proceeds in inventory will see its cash position unchanged.

Accepted Answer

A) True 
 B)False

Question 11

A firm has projected the following values for the next three months:

Accepted Answer

@#IMG-DLM& All sales are credit sales with 30% col

Question 12

In the preparation of cash budgets, capital expenditures are:

Accepted Answer

A)  not included because these items are depreciated. 
B)  included as sources of operating cash. 
C)  included as uses of cash and make the budget lumpy. 
D) traditionally offset as a use of cash by interest income. 
A)  not included because these items are depreciated. 
B)  included as sources of operating cash. 
C)  included as uses of cash and make the budget lumpy. 
D) traditionally offset as a use of cash by interest income.

Question 13

Which one of these statements correctly applies to the carrying costs of cash balances?

Accepted Answer

A)  Cash balances have no carrying costs. 
B)  The opportunity costs of cash exceed their carrying costs. 
C)  Cash balances incur an opportunity cost. 
D) Cash balances only have a carrying cost if they are negative. 
A)  Cash balances have no carrying costs. 
B)  The opportunity costs of cash exceed their carrying costs. 
C)  Cash balances incur an opportunity cost. 
D) Cash balances only have a carrying cost if they are negative.

Question 14

An increase in accounts payable is a source of cash.

Accepted Answer

A) True 
 B)False

Question 15

With a revolving line of credit, a firm can borrow and repay whenever it wants so long as the balance does not exceed the credit limit.

Accepted Answer

A) True 
 B)False

Question 16

How high can accounts receivable be before the firm's receivables period exceeds 50 days, if annual sales equal $5 million and the cash conversion cycle equals 75 days?

Accepted Answer

A)  $342,466 
B)  $684,932 
C)  $1,027,397 
D) $1,712,329 
A)  $342,466 
B)  $684,932 
C)  $1,027,397 
D) $1,712,329

Question 17

When accounts payable exceed the sum of inventory and accounts receivable, net working capital must be negative.

Accepted Answer

A) True 
 B)False

Question 18

Managers who "stretch their payables" are attempting to:

Accepted Answer

A)  repay more recent charges prior to early charges. 
B)  improve their current ratio prior to preparing financial statements. 
C)  offer finished goods at a discount for quicker repayment. 
D) obtain a longer term for short-term financing. 
A)  repay more recent charges prior to early charges. 
B)  improve their current ratio prior to preparing financial statements. 
C)  offer finished goods at a discount for quicker repayment. 
D) obtain a longer term for short-term financing.

Exam 19: Short-Term Financial Planning

An increase in current liabilities is a source of cash for the firm.

The longer the firm's accounts payable period, the:

During the year the following changes were observed. I. Inventory period increased by 12 days. II) Receivables period decreased by 6 days. III) Accounts payable period increased by 4 days. What is the net change in the cash conversion cycle?

Describe in general a firm's cash conversion cycle.

How does the firm's sources and uses of cash relate to its need for short-term borrowing?

An increase in long-term assets is a source of cash.

How do firms develop a short-term financial plan that meets their need for cash?

What are some of the major sources of short-term financing and how are interest rates commonly quoted on these types of loans?

A firm sells its $1,000,000 of receivables to a factor for $960,000. What is the effective annual rate on this arrangement if the average collection period is one month?

A company that borrows $1 million long term and invests the proceeds in inventory will see its cash position unchanged.

A firm has projected the following values for the next three months:

In the preparation of cash budgets, capital expenditures are:

Which one of these statements correctly applies to the carrying costs of cash balances?

An increase in accounts payable is a source of cash.

With a revolving line of credit, a firm can borrow and repay whenever it wants so long as the balance does not exceed the credit limit.

How high can accounts receivable be before the firm's receivables period exceeds 50 days, if annual sales equal $5 million and the cash conversion cycle equals 75 days?

When accounts payable exceed the sum of inventory and accounts receivable, net working capital must be negative.

Managers who "stretch their payables" are attempting to:

Goals and Governance of the Corporation

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

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