Exam 17: Cash,receivables,and Inventory Management

A flower shop is trying to determine the optimal order quantity of the wicker baskets that it places many of its arrangements in.The store thinks it will sell 2000 of these baskets over the next year.The baskets cost the shop $2.00 each.The carrying costs of the baskets is $0.15 each per year.It costs the shop $8.00 to order. a.What is the economic order quantity? b.What is the total cost for ordering the baskets once a year? Four times a year?

Flashbinder Guitars,Inc.is negotiating with the bank for a lockbox system that is expected to reduce check collection time by 4 days.Flashbinder Guitars' average check size is $1,200 and any funds freed up by the new system will be invested in a money market account that is currently paying 2.5% annually.What is the most Flashbinder Guitars should be willing to pay the bank for the lockbox service,assuming the bank charges a per-check processing fee?

The time necessary for a deposited check to clear through the commercial banking system causes which of the following types of floats?

A negotiable certificate of deposit is a marketable receipt for funds deposited in a bank for a period of one to 18 months.

A corporation that is short on cash will take a trade discount of 2/10 net 30 only if the corporation's cost of funds is less than 2%.

Which of the following might occur when a firm increases its collection efforts:

A company that has an unpredictable cash flow,and is holding cash because of things that might happen due to this uncertainty,is holding a larger minimum cash balance due to which type of motive?

Flashbinder Guitars,Inc.is considering a lockbox system that will increase its check processing cost by $.15 per check.The company estimates an average check size of $1,700 and expects the lockbox to reduce check collection time by 3 days.What annual before-tax yield must Flashbinder Guitars,Inc.earn on its marketable securities for the lockbox system to be beneficial?

The purpose of finished goods inventory is to uncouple the production and sales functions so that it is not necessary to produce the goods before a sale can occur.

U.S.Treasury Bills are exempt from federal,state,and local income taxes.

U.S.Treasury Bills,bankers' acceptances and commercial paper are all sold on a discount basis.

The main purpose of using a payable-through draft system is to gain effective control over field payments.

In the EOQ model,the carrying cost on inventory should include the required rate of an investment in inventory.

Which of the following is NOT a category of inventory?

Which of the following is NOT a motive for a corporation to hold cash balances?

U.S.Treasury Bills are extremely liquid due to excellent secondary markets.

The EOQ model calculates the size of the firm's inventory given its expected usage,carrying costs,and ordering costs.

Companies with the largest cash balances reduce their risk of insolvency and thus maximize the value of the companies for their shareholders.

Cash management system objectives include

Anticipatory buying occurs because of an anticipated decrease in interest rates.