Exam 26: Short-Term Finance and Planning

Uptown Bank has granted a line of credit of $80,000 with an interest rate of 7.5 percent and a compensating balance requirement of 2.5 percent to Jones Hardware.The compensating balance requirement is based on the total amount borrowed.What is the effective annual interest rate if the firm needs $55,000 for one year to finance its inventory?

Which one of the following will increase net working capital? Assume the current ratio is greater than 1.0.

If your accounts receivable period is 30 days,you will collect payment for your ________ sales during the second quarter of a calendar year.

The length of time between the acquisition of inventory and the collection of cash from receivables is called the:

The most common means of financing a temporary cash deficit is a:

Orio Inc.has a beginning receivables balance on January 1st of $685.Sales for January through April are $735,$690,$770,and $850,respectively.The accounts receivable period is 30 days.How much did the firm collect in the month of April? Assume a 30-day month.

Baxter's collects 30 percent of its sales in the month of sale,55 percent in the month following the month of sale,and 13 percent in the second month following the month of sale.Given this,the company will collect ________ sales during the month of May.

Amanda's Interior Design has credit sales of $783,000,costs of goods sold of $418,000,and average accounts receivable of $107,900.How long does it take its credit customers to pay for their purchases?

Modern Sound has sales of $811,000 and average accounts payable of $87,400.The cost of goods sold is equivalent to 72 percent of sales.How long does it take the firm to pay its suppliers?

For 2018,Blue Moon had sales of $318,000,cost of goods sold of $249,000,and ending inventory of $138,000.For 2019,sales were $349,000,cost of goods sold were $256,000,and ending inventory was $151,000.What was the inventory period for 2019?

Which one of the following will decrease the net working capital of a firm? Assume the current ratio is greater than 1.0.

Compensating balances are often included as a requirement for a line of credit.These balances provide income to banks but add to the cost of financing for the borrower.Why,then,would borrowers agree to such an arrangement?

Alpha Companies has an operating cycle of 328 days,a receivables period of 64 days,and a payables period of 98 days.If the firm revises its credit policy,it believes it can reduce its receivables period by 9 days.Given this revision,what will be the firm's new cash cycle?

On average,D & M sells its inventory in 37 days,collects on its receivables in 3.4 days,and takes 35 days to pay for its purchases.What is the length of the firm's operating cycle?

Which one of the following is a use of cash?

Jordan and Sons has an inventory period of 48.6 days,an accounts payable period of 36.2 days,and an accounts receivable period of 29.3 days.Management is considering offering a discount of 5 percent if its credit customers pay for their purchases within 10 days.This discount is expected to reduce the receivables period by 17 days.If the discount is offered,the operating cycle will decrease from ________ days to ________ days.

A restrictive short-term financial policy tends to:

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