Question 1

The cash cycle equals the:

Accepted Answer

A) inventory period plus the accounts receivable period. 
B) change in net working capital divided by daily sales. 
C) operating cycle plus the accounts payable period. 
D) operating cycle minus the inventory period. 
E) operating cycle minus the accounts payable period. 
A) inventory period plus the accounts receivable period. 
B) change in net working capital divided by daily sales. 
C) operating cycle plus the accounts payable period. 
D) operating cycle minus the inventory period. 
E) operating cycle minus the accounts payable period.

Question 2

A prearranged,short-term bank loan up to a specified limit,made on a formal or informal basis,is called a:

Accepted Answer

A) letter of credit. 
B) cleanup loan. 
C) compensating balance. 
D) line of credit. 
E) roll-over. 
A) letter of credit. 
B) cleanup loan. 
C) compensating balance. 
D) line of credit. 
E) roll-over.

Question 3

Which one of the following is a source of cash?

Accepted Answer

A) An increase in accounts receivable 
B) An increase in fixed assets 
C) A decrease in long-term debt 
D) The payment of a cash dividend 
E) An increase in accounts payable 
A) An increase in accounts receivable 
B) An increase in fixed assets 
C) A decrease in long-term debt 
D) The payment of a cash dividend 
E) An increase in accounts payable

Question 4

Which party(ies)is(are)ultimately responsible for an invoice from a supplier that is subject to a bankers' acceptance?

Accepted Answer

A) The bank which issued the acceptance 
B) The purchasing firm 
C) The investors who purchased the banker's acceptance 
D) The vendor who issued the invoice 
E) Both the bank and the purchasing firm jointly 
A) The bank which issued the acceptance 
B) The purchasing firm 
C) The investors who purchased the banker's acceptance 
D) The vendor who issued the invoice 
E) Both the bank and the purchasing firm jointly

Question 5

The cash cycle will decrease as a result of increasing the:

Accepted Answer

A) payables turnover. 
B) days sales in inventory. 
C) operating cycle. 
D) inventory turnover rate. 
E) accounts receivable period. 
A) payables turnover. 
B) days sales in inventory. 
C) operating cycle. 
D) inventory turnover rate. 
E) accounts receivable period.

Question 6

A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a:

Accepted Answer

A) compensating balance. 
B) cleanup loan. 
C) letter of credit. 
D) line of credit. 
E) roll-over. 
A) compensating balance. 
B) cleanup loan. 
C) letter of credit. 
D) line of credit. 
E) roll-over.

Question 7

The manager responsible for applying payments to customer's accounts is the:

Accepted Answer

A) controller. 
B) payables manager. 
C) credit manager. 
D) purchasing manager. 
E) production manager. 
A) controller. 
B) payables manager. 
C) credit manager. 
D) purchasing manager. 
E) production manager.

Question 8

The length of time between the acquisition of inventory and its sale is called the:

Accepted Answer

A) operating cycle. 
B) inventory period. 
C) accounts receivable period. 
D) accounts payable period. 
E) cash cycle. 
A) operating cycle. 
B) inventory period. 
C) accounts receivable period. 
D) accounts payable period. 
E) cash cycle.

Question 9

Shortage costs include all the following except the:

Accepted Answer

A) opportunity costs related to a low return on assets. 
B) order costs. 
C) disruption of production schedules. 
D) production setup costs. 
E) lost sales. 
A) opportunity costs related to a low return on assets. 
B) order costs. 
C) disruption of production schedules. 
D) production setup costs. 
E) lost sales.

Question 10

As of the beginning of the quarter,Lester's Market had a cash balance of $326.During the quarter the market paid suppliers $310,collected $418 on its accounts receivables,paid an interest payment of $32,and a tax bill of $184.In addition,the market borrowed $80.What was the cash balance at the end of the quarter?

Accepted Answer

A) $298 
B) $267 
C) $255 
D) $272 
E) $286 
A) $298 
B) $267 
C) $255 
D) $272 
E) $286

Question 11

Clancy's has a beginning cash balance of $27 and a net cash inflow for the quarter of −$52.Company policy is to maintain a minimum cash balance of $20 and borrow only the amount that is necessary to maintain that balance.How much,if any,does the firm need to borrow this quarter?

Accepted Answer

A) $17 
B) $52 
C) $45 
D) $25 
E) $0 
A) $17 
B) $52 
C) $45 
D) $25 
E) $0

Question 12

Net working capital is defined as the:

Accepted Answer

A) current assets of a business. 
B) difference between current assets and current liabilities. 
C) present value of short-term cash flows. 
D) difference between all assets and liabilities. 
E) difference between total current assets and cash. 
A) current assets of a business. 
B) difference between current assets and current liabilities. 
C) present value of short-term cash flows. 
D) difference between all assets and liabilities. 
E) difference between total current assets and cash.

Question 13

Which one of these statements concerning the cash cycle is correct?

Accepted Answer

A) The cash cycle is equal to the operating cycle minus the inventory period. 
B) A negative cash cycle is actually preferable to a positive cash cycle. 
C) Granting credit to slower paying customers tends to decrease the cash cycle. 
D) The cash cycle plus the accounts receivable period is equal to the operating cycle. 
E) The most desirable cash cycle is the one that equals zero days. 
A) The cash cycle is equal to the operating cycle minus the inventory period. 
B) A negative cash cycle is actually preferable to a positive cash cycle. 
C) Granting credit to slower paying customers tends to decrease the cash cycle. 
D) The cash cycle plus the accounts receivable period is equal to the operating cycle. 
E) The most desirable cash cycle is the one that equals zero days.

Question 14

Quiet Press has an accounts receivable period of 38 days.The estimated quarterly sales for this year,starting with the first quarter,are $1,200,$1,400,$1,900,and $1,200,respectively.How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.

Accepted Answer

A) $1,592.08 
B) $1,604.44 
C) $1,495.56 
D) $1,509.11 
E) $1,660.02 
A) $1,592.08 
B) $1,604.44 
C) $1,495.56 
D) $1,509.11 
E) $1,660.02

Question 15

Given a fixed level of sales and a constant profit margin,an increase in the accounts payable period can result from:

Accepted Answer

A) an increase in the cost of goods sold account value. 
B) an increase in the ending accounts payable balance. 
C) an increase in the cash cycle. 
D) a decrease in the operating cycle. 
E) a decrease in the average accounts payable balance. 
A) an increase in the cost of goods sold account value. 
B) an increase in the ending accounts payable balance. 
C) an increase in the cash cycle. 
D) a decrease in the operating cycle. 
E) a decrease in the average accounts payable balance.

Question 16

Given a flexible financing policy,a growing firm generally has a permanent requirement for:

Accepted Answer

A) both current and long-term assets. 
B) long-term assets only. 
C) short-term debt. 
D) both short- and long-term debt. 
E) current assets and short-term debt. 
A) both current and long-term assets. 
B) long-term assets only. 
C) short-term debt. 
D) both short- and long-term debt. 
E) current assets and short-term debt.

Question 17

Dixon's has a beginning receivables balance on January 1st of $930.Sales for January through April are $970,$1,050,$1,330,and $1,460,respectively.The accounts receivable period is 36 days.How much did the firm collect in the month of March? Assume a 30-day month.

Accepted Answer

A) $1,034 
B) $1,316 
C) $1,289 
D) $1,350 
E) $1,180 
A) $1,034 
B) $1,316 
C) $1,289 
D) $1,350 
E) $1,180

Question 18

Last year,Wilson's had credit sales of $927,000 and cost of goods sold of $762,000.The beginning of the year inventory was $138,000 and the end of the year inventory was $154,300.If the accounts receivables average $87,400,what is the operating cycle?

Accepted Answer

A) 88.23 days 
B) 104.42 days 
C) 78.60 days 
D) 70.01 days 
E) 92.09 days 
A) 88.23 days 
B) 104.42 days 
C) 78.60 days 
D) 70.01 days 
E) 92.09 days

Question 19

In working capital management,there are some actions that increase or decrease cash.What are some of the items that increase and decrease the cash account,respectively?

Accepted Answer

There are several activities that will i

Question 20

Costs of the firm that fall with increased levels of investment in its current assets are called ________ costs.

Accepted Answer

A) carrying 
B) shortage 
C) debt 
D) equity 
E) payables 
A) carrying 
B) shortage 
C) debt 
D) equity 
E) payables

Exam 26: Short-Term Finance and Planning

The cash cycle equals the:

A prearranged,short-term bank loan up to a specified limit,made on a formal or informal basis,is called a:

Which one of the following is a source of cash?

Which party(ies)is(are)ultimately responsible for an invoice from a supplier that is subject to a bankers' acceptance?

The cash cycle will decrease as a result of increasing the:

A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a:

The manager responsible for applying payments to customer's accounts is the:

The length of time between the acquisition of inventory and its sale is called the:

Shortage costs include all the following except the:

Clancy's has a beginning cash balance of $27 and a net cash inflow for the quarter of −$52.Company policy is to maintain a minimum cash balance of $20 and borrow only the amount that is necessary to maintain that balance.How much,if any,does the firm need to borrow this quarter?

Net working capital is defined as the:

Which one of these statements concerning the cash cycle is correct?

Quiet Press has an accounts receivable period of 38 days.The estimated quarterly sales for this year,starting with the first quarter,are $1,200,$1,400,$1,900,and $1,200,respectively.How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.

Given a fixed level of sales and a constant profit margin,an increase in the accounts payable period can result from:

Given a flexible financing policy,a growing firm generally has a permanent requirement for:

Dixon's has a beginning receivables balance on January 1st of $930.Sales for January through April are $970,$1,050,$1,330,and $1,460,respectively.The accounts receivable period is 36 days.How much did the firm collect in the month of March? Assume a 30-day month.

Last year,Wilson's had credit sales of $927,000 and cost of goods sold of $762,000.The beginning of the year inventory was $138,000 and the end of the year inventory was $154,300.If the accounts receivables average $87,400,what is the operating cycle?

In working capital management,there are some actions that increase or decrease cash.What are some of the items that increase and decrease the cash account,respectively?

Costs of the firm that fall with increased levels of investment in its current assets are called ________ costs.

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

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