Exam 17: Cash,receivables,and Inventory Management

Determine the effective annualized cost of forgoing the trade discount on terms 1/20 net 45.

Lockbox arrangement benefits include

When a corporation designs an investment strategy for investing temporary excess cash balances in marketable securities,it must consider a variety of factors.Which of the following is the least important?

Salamander Insurance Company tries to settle claims as quickly as possible.In certain cases,agents can present payments to claimants which are cleared through the banking system like a check,but must be passed through the Insurance Company for approved prior to payment.This is an example of a

Which of the following has the highest interest rate risk?

If you compare the yield of a municipal bond with that of a negotiable certificate of deposit,what is the equivalent before-tax yield of the certificate of deposit if the municipal bond has a yield of 8% per year and the investor has a marginal tax rate of 28%?

The EOQ model assumes constant demand and constant unit price.

A construction firm that accumulates cash in anticipation of a significant drop in lumber costs is an example of the ________ motive for holding cash.

The Bike Store orders $2000 worth of supplies every 30 days.If they take advantage of the 3/10 net 30 discount offered by their supplier,how much would they save over the year? Assume a 360-day year.

A firm's credit and collection policies usually include

A large corporation has annual sales revenues of $6 billion.The corporation currently earns 2.25% on its money market account.If the corporation can reduce its float by three days by making its billing and collection functions more efficient,the company's operating profits will increase by approximately

Marketable securities are near-cash assets because they can be converted into cash quickly.

Current assets in order of liquidity are cash,marketable securities,inventory,and accounts receivable.

Marketable securities are purchased when excess cash is temporarily available and sold when cash is needed.

Efficient collection of accounts receivable helps to determine both the profitability and the liquidity of the firm.

The purpose of carrying inventory is to

A textile manufacturer has cloth that has a $14 per yard carrying cost per year.This cloth is used at a rate of 25,000 yards per year,and ordering costs are $10 per order. a.What is the economic order quantity for this cloth? b.What are the annual inventory costs for this firm if it orders in this quantity?

The financial manager typically cannot control the level of credit sales,and hence the company's investment in accounts receivable,as the level of credit sales is determined in large part by the nature of the business enterprise.

The corporate treasurer of Wooden Furniture Inc.is considering the purchase of either a municipal obligation with a 6.1% coupon or a corporate bond with a 9.5% return.Both bonds have a $1,000 par value.The company is currently in the 35% marginal tax bracket.Which security should the treasurer recommend?

Fiesta Taco Company purchases 30,000 boxes of ground beef each year.It costs $50 to place each order and $10.00 per year for each box held as inventory. a.What is the average inventory held during the year? b.What is the economic order quantity for the ground beef? c.How many orders will be made each year?