Question 1

Which of the following money market investments is a short-term,unsecured debt obligation issued by a large corporation,with a minimum denomination of $25,000?

Accepted Answer

A) Banker's Acceptance 
B) Commercial Paper 
C) Repurchase Agreement 
D) Certificates of Deposit (C
D)  
E) Treasury Bill 
A) Banker's Acceptance 
B) Commercial Paper 
C) Repurchase Agreement 
D) Certificates of Deposit (C
D)  
E) Treasury Bill

Question 2

KT Enterprises would like to construct and operate a new ice skating rink.In addition to the capital expenditures on the rink,management estimates that the project will require an investment today of $220,000 in net working capital.The firm will recover the investment in net working capital fifteen years from today,when management anticipates closing the rink.The discount rate for this type of cash flow is 8% per year.Calculate the present value of the cost of working capital for the ice skating rink.

Accepted Answer

NPV = -$22

Question 3

Use the following information for the question(s)below.
Wyatt Oil has the following accounts on its books:   Wyatt extends credit on terms of 1/15,net 30.
-The percentage of Wyatt's receivables that are current is closest to:

Accepted Answer

A) 32.1% 
B) 38.3% 
C) 42.2% 
D) 61.7% 
A) 32.1% 
B) 38.3% 
C) 42.2% 
D) 61.7%

Question 4

Kinston Industries has an average accounts payable balance of $220,000.Its annual cost of goods sold is $5,475,000,and it receives terms of 2/10,net 30 from its suppliers.Kinston chooses to forgo this discount.Is Kinston managing its accounts payables well?

Accepted Answer

The firm is not managing its accounts pa

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) The aging schedule is also sometimes augmented by analysis of the payments pattern,which provides information on the percentage of monthly sales that the firm collects in each month after the sale. 
B) Because accounts receivable days can be calculated from the firm's financial statement,outside investors commonly use this measure to evaluate a firm's credit management policy. 
C) If the aging schedule gets "top-heavy"-that is,if the percentages in the upper half of the schedule begin to increase-the firm will likely need to revisit its credit policy. 
D) Seasonal sales patterns may cause the number calculated for the accounts receivable days to change depending on when the calculation takes place. 
A) The aging schedule is also sometimes augmented by analysis of the payments pattern,which provides information on the percentage of monthly sales that the firm collects in each month after the sale. 
B) Because accounts receivable days can be calculated from the firm's financial statement,outside investors commonly use this measure to evaluate a firm's credit management policy. 
C) If the aging schedule gets "top-heavy"-that is,if the percentages in the upper half of the schedule begin to increase-the firm will likely need to revisit its credit policy. 
D) Seasonal sales patterns may cause the number calculated for the accounts receivable days to change depending on when the calculation takes place.

Question 6

Describe "just-in-time" inventory management.

Accepted Answer

Some firms seek to reduce their carrying

Question 7

Collection float is made up of all of the following EXCEPT:

Accepted Answer

A) disbursement float. 
B) processing float. 
C) mail float. 
D) availability float. 
A) disbursement float. 
B) processing float. 
C) mail float. 
D) availability float.

Question 8

Which of the following money market investments is essentially a loan arrangement wherein the investor buys securities from the securities dealer,with an agreement to sell the securities back to the dealer at a later date for a specified higher price?

Accepted Answer

A) Certificates of Deposit (C
D)  
B) Commercial Paper 
C) Banker's Acceptance 
D) Repurchase Agreement 
E) Treasury Bill 
A) Certificates of Deposit (C
D)  
B) Commercial Paper 
C) Banker's Acceptance 
D) Repurchase Agreement 
E) Treasury Bill

Question 9

Which of the following money market investments is a short-term debt obligation of the U.S.government?

Accepted Answer

A) Treasury Bill 
B) Repurchase Agreement 
C) Commercial Paper 
D) Certificates of Deposit (C
D)  
E) Banker's Acceptance 
A) Treasury Bill 
B) Repurchase Agreement 
C) Commercial Paper 
D) Certificates of Deposit (C
D)  
E) Banker's Acceptance

Question 10

Hammond's cash conversion cycle in 2009 is closest to:

Accepted Answer

A) 22 days 
B) 44 days 
C) 58 days 
D) 66 days 
A) 22 days 
B) 44 days 
C) 58 days 
D) 66 days

Question 11

Which of the following statements is FALSE?

Accepted Answer

A) After a firm decides on its credit standards,it must next establish its credit terms. 
B) The decision of how much credit risk to assume plays a large role in determining how much money a firm ties up in its payables. 
C) Knowledge of the payments pattern is also useful for forecasting the firm's working capital requirements. 
D) An aging schedule categorizes accounts by the number of days they have been on the firm's books. 
A) After a firm decides on its credit standards,it must next establish its credit terms. 
B) The decision of how much credit risk to assume plays a large role in determining how much money a firm ties up in its payables. 
C) Knowledge of the payments pattern is also useful for forecasting the firm's working capital requirements. 
D) An aging schedule categorizes accounts by the number of days they have been on the firm's books.

Question 12

Your firm purchases goods from its supplier on terms of 1/10,net 30.The effective annual cost to your firm if it chooses not to take advantage of the trade discount offered is closest to:

Accepted Answer

A) 16.8% 
B) 44.6% 
C) 20.1% 
D) 13.0% 
A) 16.8% 
B) 44.6% 
C) 20.1% 
D) 13.0%

Question 13

Which of the following money market investments is short-term debt issued by a bank with a minimum denomination of $100,000?

Accepted Answer

A) Treasury Bill 
B) Banker's Acceptance 
C) Repurchase Agreement 
D) Commercial Paper 
E) Certificates of Deposit (C
D)  
A) Treasury Bill 
B) Banker's Acceptance 
C) Repurchase Agreement 
D) Commercial Paper 
E) Certificates of Deposit (C
D)

Question 14

Use the following information to answer the question(s)below:
Rearden Metal (RM)had $120 million in sales in 2009.Its cost of goods sold was $85,and its average inventory balance was $15 million.
-The average number of inventory days outstanding for Rearden is closest to:

Accepted Answer

A) 6 days 
B) 8 days 
C) 37 days 
D) 64 days 
A) 6 days 
B) 8 days 
C) 37 days 
D) 64 days

Question 15

The cash conversion cycle (CCC)is defined as:

Accepted Answer

A) Inventory Days + Accounts Receivable Days - Accounts Payable Days. 
B) Inventory Days - Accounts Receivable Days - Accounts Payable Days. 
C) Inventory Days + Accounts Receivable Days + Accounts Payable Days. 
D) Inventory Days + Accounts Payable Days - Accounts Receivable Days. 
A) Inventory Days + Accounts Receivable Days - Accounts Payable Days. 
B) Inventory Days - Accounts Receivable Days - Accounts Payable Days. 
C) Inventory Days + Accounts Receivable Days + Accounts Payable Days. 
D) Inventory Days + Accounts Payable Days - Accounts Receivable Days.

Question 16

Luther's cash conversion cycle is closest to:

Accepted Answer

A) 51 days 
B) 66 days 
C) 71 days 
D) 129 days 
A) 51 days 
B) 66 days 
C) 71 days 
D) 129 days

Question 17

Which of the following statements is FALSE?

Accepted Answer

A) The lower the discount percentage offered,the greater the cost of forgoing the discount and using trade credit. 
B) A firm should choose to borrow using accounts payable only if trade credit is the cheapest source of funding. 
C) A firm should always pay on the latest day allowed. 
D) A firm should strive to keep its money working for it as long as possible without developing a bad relationship with its suppliers or engaging in unethical practices. 
A) The lower the discount percentage offered,the greater the cost of forgoing the discount and using trade credit. 
B) A firm should choose to borrow using accounts payable only if trade credit is the cheapest source of funding. 
C) A firm should always pay on the latest day allowed. 
D) A firm should strive to keep its money working for it as long as possible without developing a bad relationship with its suppliers or engaging in unethical practices.

Question 18

What is a compensating balance?

Accepted Answer

A firm's bank may require it to hold a c

Question 19

Wyatt Oil purchases goods from its suppliers on terms 3/20 net 40.The effective annual cost to Wyatt if they do not take the discount and pay on day 50 is closest to:

Accepted Answer

A) 18% 
B) 45% 
C) 75% 
D) 82% 
A) 18% 
B) 45% 
C) 75% 
D) 82%

Question 20

Goldsboro Industries has an average accounts payable balance of $680,000.Its annual cost of goods sold is $4,500,000,and it receives terms of 1/10,net 40 from its suppliers.Goldsboro chooses to forgo this discount.Is Goldsboro managing its accounts payables well?

Accepted Answer

The firm is not managing its accounts pa

Exam 26: Working Capital Management

Which of the following money market investments is a short-term,unsecured debt obligation issued by a large corporation,with a minimum denomination of $25,000?

Use the following information for the question(s)below. Wyatt Oil has the following accounts on its books: Wyatt extends credit on terms of 1/15,net 30. -The percentage of Wyatt's receivables that are current is closest to:

Kinston Industries has an average accounts payable balance of $220,000.Its annual cost of goods sold is $5,475,000,and it receives terms of 2/10,net 30 from its suppliers.Kinston chooses to forgo this discount.Is Kinston managing its accounts payables well?

Which of the following statements is FALSE?

Describe "just-in-time" inventory management.

Collection float is made up of all of the following EXCEPT:

Which of the following money market investments is essentially a loan arrangement wherein the investor buys securities from the securities dealer,with an agreement to sell the securities back to the dealer at a later date for a specified higher price?

Which of the following money market investments is a short-term debt obligation of the U.S.government?

Hammond's cash conversion cycle in 2009 is closest to:

Which of the following statements is FALSE?

Your firm purchases goods from its supplier on terms of 1/10,net 30.The effective annual cost to your firm if it chooses not to take advantage of the trade discount offered is closest to:

Which of the following money market investments is short-term debt issued by a bank with a minimum denomination of $100,000?

Use the following information to answer the question(s)below: Rearden Metal (RM)had $120 million in sales in 2009.Its cost of goods sold was $85,and its average inventory balance was $15 million. -The average number of inventory days outstanding for Rearden is closest to:

The cash conversion cycle (CCC)is defined as:

Luther's cash conversion cycle is closest to:

Which of the following statements is FALSE?

What is a compensating balance?

Wyatt Oil purchases goods from its suppliers on terms 3/20 net 40.The effective annual cost to Wyatt if they do not take the discount and pay on day 50 is closest to:

Goldsboro Industries has an average accounts payable balance of $680,000.Its annual cost of goods sold is $4,500,000,and it receives terms of 1/10,net 40 from its suppliers.Goldsboro chooses to forgo this discount.Is Goldsboro managing its accounts payables well?

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

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