Question 1

A firm that follows a relaxed strategy toward the total capital requirement will be a:

Accepted Answer

A)  short-term borrower. 
B)  short-term lender. 
C)  long-term lender. 
D)  long-term borrower. 
A)  short-term borrower. 
B)  short-term lender. 
C)  long-term lender. 
D)  long-term borrower. B

Question 2

A firm starts the week with payables of $172,000.It pays $80,000 of outstanding bills,and purchases $44,000 of raw materials on one month's credit.What is the level of payables at the end of the week?

Accepted Answer

A)  $136,000. 
B)  $208,000. 
C)  $96,000. 
D)  $216,000. 
A)  $136,000. 
B)  $208,000. 
C)  $96,000. 
D)  $216,000. A

Question 3

Zeta Stores places orders for 60% of the sales forecast in the next month and for 40% of the sales forecast for the following month.It pays for these goods with a 1-month delay? If sales for August are forecast at $10 million and sales for September and October are forecast at $12 million,what will be the forecast cash outflow in September?

Accepted Answer

A)  $10.8 million 
B)  $15.6 million 
C)  $4.8 million 
D)  $9.6 million 
A)  $10.8 million 
B)  $15.6 million 
C)  $4.8 million 
D)  $9.6 million D

Question 4

Unless customers pay cash on delivery,cash flow comes from collections on receivables.

Accepted Answer

A) True 
 B)False

Question 5

An increase in accounts payable is a source of cash.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following is more likely for a firm practicing the relaxed strategy of long-versus short-term borrowing at the height of sales demand?

Accepted Answer

A)  It will borrow heavily on a short-term basis. 
B)  At the height of demand, it will invest heavily in marketable securities. 
C)  It will borrow on both a long-term and a short-term basis. 
D)  It's long-term financing will approximately equal its total capital requirements. 
A)  It will borrow heavily on a short-term basis. 
B)  At the height of demand, it will invest heavily in marketable securities. 
C)  It will borrow on both a long-term and a short-term basis. 
D)  It's long-term financing will approximately equal its total capital requirements.

Question 7

When internally generated cash is temporarily insufficient to meet a firm's cash need,the firm following a middle-of-the-road policy for long- versus short-term financing will:

Accepted Answer

A)  borrow short term. 
B)  borrow long term. 
C)  hold marketable securities. 
D)  payoff all debts. 
A)  borrow short term. 
B)  borrow long term. 
C)  hold marketable securities. 
D)  payoff all debts.

Question 8

When the length of the financing is directly related to the life of the asset being financed,the firm is said to follow a:

Accepted Answer

A)  policy of maturity matching. 
B)  restrictive financing strategy. 
C)  matched depreciation strategy. 
D)  minimum working capital strategy. 
A)  policy of maturity matching. 
B)  restrictive financing strategy. 
C)  matched depreciation strategy. 
D)  minimum working capital strategy.

Question 9

Firms with surplus cash can use it to increase dividends or buy back securities.

Accepted Answer

A) True 
 B)False

Question 10

Issuing additional long-term debt of $5 million and buying new long-term assets worth $4 million and short-term assets of $1 million will result in a net cash flow of:

Accepted Answer

A)  $5 million 
B)  $9 million 
C)  $0 million 
D)  $4 million 
A)  $5 million 
B)  $9 million 
C)  $0 million 
D)  $4 million

Question 11

Companies with unusually high cash reserves often hold the cash in tax havens.

Accepted Answer

A) True 
 B)False

Question 12

The planning horizon for cash budgeting is usually at least five years.

Accepted Answer

A) True 
 B)False

Question 13

Zeta Stores places orders for 60% of the sales forecast in the next month and for 40% of the sales forecast for the following month.It pays for these goods with a 2-month delay.If sales for August are forecast at $10 million and sales for September and October are forecast at $12 million,what will be the forecast cash outflow in September?

Accepted Answer

A)  $10.8 million. 
B)  $15.6 million. 
C)  $4.8 million. 
D)  $9.6 million. 
A)  $10.8 million. 
B)  $15.6 million. 
C)  $4.8 million. 
D)  $9.6 million.

Question 14

A company that matches maturities will generally try to finance its receivables with long-term debt.

Accepted Answer

A) True 
 B)False

Question 15

A firm had $2,800 cash at the beginning of the period.During the period,the firm collected $1,600 in receivables,paid $1,850 to supplier,had credit sales of $4,200,and incurred cash expenses of $2,300.What was the cash balance at the end of the period?

Accepted Answer

A)  $4,450 
B)  $250 
C)  $2,850 
D)  $1,250 
A)  $4,450 
B)  $250 
C)  $2,850 
D)  $1,250

Question 16

Firms with a permanent investment in working capital finance that investment with short-term debt.

Accepted Answer

A) True 
 B)False

Question 17

There are three steps to constructing a cash budget.Which of the following is not one of those steps?

Accepted Answer

A)  Calculate whether the firm is facing a cash shortage or surplus. 
B)  Forecast the uses of cash. 
C)  Set a policy for deciding how much time to give customers to pay. 
D)  Forecast the sources of cash. 
A)  Calculate whether the firm is facing a cash shortage or surplus. 
B)  Forecast the uses of cash. 
C)  Set a policy for deciding how much time to give customers to pay. 
D)  Forecast the sources of cash.

Question 18

A firm has $50 million and $60 million credit sales during the first two quarters of the year.Eighty percent of the receivables are collected in the same quarter and the balance in the next quarter.What will be the total collection for the firm in the second quarter?

Accepted Answer

A)  $55 million 
B)  $58 million 
C)  $88 million 
D)  $98 million 
A)  $55 million 
B)  $58 million 
C)  $88 million 
D)  $98 million

Question 19

A firm starts with $5,000 of accounts receivables and ends the period with $4,000 of receivables.If it collected $4,000 of receivables during the period,what was the amount of sales?

Accepted Answer

A)  $19,000 
B)  $20,000 
C)  $21,000 
D)  $24,000 
A)  $19,000 
B)  $20,000 
C)  $21,000 
D)  $24,000

Question 20

Splitterfield Foods forecasts the following sales and expenses: June
July
August
Sales ($ millions)
120
150
160
Purchases of raw materials ($ millions)
70
80
85
Other expenses ($ millions)
30
38
40
Seventy percent of sales are paid for in the same month and the remainder with a delay of one month.All raw materials are paid for with a delay of one month,other expenses are paid with no delay.What is the expected cash flow from operations in July?

Accepted Answer

A)  $29.5 million. 
B)  $32 million. 
C)  $33 million. 
D)  $20 million. 
A)  $29.5 million. 
B)  $32 million. 
C)  $33 million. 
D)  $20 million.

Exam 19: Short-Term Financial Planning

A firm that follows a relaxed strategy toward the total capital requirement will be a:

A firm starts the week with payables of $172,000.It pays $80,000 of outstanding bills,and purchases $44,000 of raw materials on one month's credit.What is the level of payables at the end of the week?

Unless customers pay cash on delivery,cash flow comes from collections on receivables.

An increase in accounts payable is a source of cash.

Which one of the following is more likely for a firm practicing the relaxed strategy of long-versus short-term borrowing at the height of sales demand?

When internally generated cash is temporarily insufficient to meet a firm's cash need,the firm following a middle-of-the-road policy for long- versus short-term financing will:

When the length of the financing is directly related to the life of the asset being financed,the firm is said to follow a:

Firms with surplus cash can use it to increase dividends or buy back securities.

Issuing additional long-term debt of $5 million and buying new long-term assets worth $4 million and short-term assets of $1 million will result in a net cash flow of:

Companies with unusually high cash reserves often hold the cash in tax havens.

The planning horizon for cash budgeting is usually at least five years.

A company that matches maturities will generally try to finance its receivables with long-term debt.

A firm had $2,800 cash at the beginning of the period.During the period,the firm collected $1,600 in receivables,paid $1,850 to supplier,had credit sales of $4,200,and incurred cash expenses of $2,300.What was the cash balance at the end of the period?

Firms with a permanent investment in working capital finance that investment with short-term debt.

There are three steps to constructing a cash budget.Which of the following is not one of those steps?

A firm has $50 million and $60 million credit sales during the first two quarters of the year.Eighty percent of the receivables are collected in the same quarter and the balance in the next quarter.What will be the total collection for the firm in the second quarter?

A firm starts with $5,000 of accounts receivables and ends the period with $4,000 of receivables.If it collected $4,000 of receivables during the period,what was the amount of sales?

Goals and Governance of the Firm

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 and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Working Capital Management

Mergers,Acquisitions,and Corporate Control

International Financial Management

Options

Risk Management

Filters