Exam 17: Cash,receivables,and Inventory Management

Float is best described by which of the below?

The Road Ready Riding,Inc.will use an estimated 24,000 wheel assemblies in its manufacturing process next year.The carrying cost of the wheel assembly inventory is $1.80 per wheel and the ordering cost per order is $50.What is Road Ready's economic ordering quantity of wheel assemblies?

Which of the following is NOT an underlying assumption of the EOQ?

A company with national sales but only one large manufacturing operation and one administrative headquarters located in the same large northeastern city would most likely use which of the following techniques for cash management?

John Maynard Keynes segmented a firm's demand for cash into the following motives:

The benefits of a lockbox system include all of the following EXCEPT

Carrying inventory reduces the costs associated with periodic bad debt losses.

A local lamp store expects to sell 2000 lamps in the coming year.It costs the store $1.00 in carrying costs for each lamp and $10.00 for each order placed. a.What is the economic order quantity for the lamps? b.How many orders will be placed each year? c.If the store wants a one-week safety stock and it takes one week to receive an order after it has been placed,what should the inventory level be when a new order is placed? Assume a 50-week year.

The objective of managing cash inflows is to decrease the float while the objective of managing cash outflows is to increase the float.

Considerations in the selection of a proper marketable-securities mix include all of the following EXCEPT

The more difficult it is to estimate a firm's cash flow needs,the greater the need to carry higher precautionary balances.

According to the Altman model,multiple discriminant analysis indicates that those applicants with a Z score below 2.7 have a significant probability of filing for bankruptcy within a year.

Jay's Lumber Supplies earns 2.5 percent on its investment in marketable securities.A draft disbursing system has been proposed that will increase disbursement float by 4 days.Purchases next year are expected to total $18 million.Individual payments average $1,000.Use a 365-day year. a.If the draft system is adopted,what amount of funds can the firm expect to release during the year? b.If each issue draft costs the firm $0.30,should the draft system be adopted? c.Should the firm consider any other factors?

Lock-box arrangements yield benefits for all companies regardless of the size of sales or customer remittance checks.

Which of the following factors determines the amount that a firm would have invested in accounts receivable?

A lock-box system reduces

In a lockbox system,customer payments are collected directly by the bank and deposited immediately in the corporation's account.

SteelCo Production,Inc.is considering the use of a lock-box collection system.SteelCo's average check receipt is $1,350.The company invests excess cash in money market certificates and receives an average of 3.5% annual interest.The lock-box system will speed up SteelCo's collections by 2.5 days.What is the maximum per check processing cost that SteelCo should be willing to pay for the lock-box system?

Credit and collection policies affect all of the following EXCEPT

Available yields on financial securities depend on their financial risk,interest rate risk,liquidity,and taxability.