Question 1

Operating cycle is measured as:

Accepted Answer

A) inventory turns minus average collection period. 
B) inventory turns plus average collection period. 
C) days' sales in inventory minus average collection period. 
D) days' sales in inventory plus average collection period. 
A) inventory turns minus average collection period. 
B) inventory turns plus average collection period. 
C) days' sales in inventory minus average collection period. 
D) days' sales in inventory plus average collection period.

Question 2

What effect does increasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

Accepted Answer

A) It will cause the cash return point to increase. 
B) It will cause the cash return point to decrease. 
C) It has no impact on the cash return point. 
D) It will cause the cash return point to first increase, then decrease. 
A) It will cause the cash return point to increase. 
B) It will cause the cash return point to decrease. 
C) It has no impact on the cash return point. 
D) It will cause the cash return point to first increase, then decrease.

Question 3

The operating cycle will decrease with all of the following changes EXCEPT:

Accepted Answer

A) the cost of goods sold increases. 
B) the level of credit sales increases. 
C) the level of inventory decreases. 
D) All of these will decrease the operating cycle. 
A) the cost of goods sold increases. 
B) the level of credit sales increases. 
C) the level of inventory decreases. 
D) All of these will decrease the operating cycle.

Question 4

If a firm has a cash cycle of 18 days and an operating cycle of 29 days,what is its payables turnover?

Accepted Answer

A) 11 
B) 18 
C) 29 
D) 33.18 
A) 11 
B) 18 
C) 29 
D) 33.18

Question 5

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and:

Accepted Answer

A) opportunity costs. 
B) financing costs. 
C) safety costs. 
D) shortage costs. 
A) opportunity costs. 
B) financing costs. 
C) safety costs. 
D) shortage costs.

Question 6

Which of the following is defined as the cost or forgone opportunity of using an asset already in use by the firm,or a person already employed by the firm,in a new project?

Accepted Answer

A) Net working capital cost 
B) Opportunity cost 
C) Shortage cost 
D) Cash cycle cost 
A) Net working capital cost 
B) Opportunity cost 
C) Shortage cost 
D) Cash cycle cost

Question 7

A production strategy that attempts to improve a firm's return on investment by reducing in-process inventory and associated carrying costs as much as possible is which of the following?

Accepted Answer

A) Production management 
B) Operations management 
C) Almost late 
D) Just in time 
A) Production management 
B) Operations management 
C) Almost late 
D) Just in time

Question 8

If a firm has a cash cycle of 25 days and an operating cycle of 80 days,what is its average payment period?

Accepted Answer

A) 25 
B) 80 
C) 55 
D) 105 
A) 25 
B) 80 
C) 55 
D) 105

Question 9

B&B Cos.has sales of $732,000 and cost of goods sold of $323,000.The firm had a beginning inventory of $48,000 and an ending inventory of $39,000.What is the length of the days' sales in inventory?

Accepted Answer

A) 37.79 days 
B) 31.84 days 
C) 44.07 days 
D) 49.02 days 
A) 37.79 days 
B) 31.84 days 
C) 44.07 days 
D) 49.02 days

Question 10

Which of these is the requirement of the firm to keep a certain percentage of the borrowed money deposited in the firm's bank accounts,whereby the bank agrees to lend money to the firm?

Accepted Answer

A) Commercial loan 
B) Line of credit 
C) Compensating balance 
D) Inventory loan 
A) Commercial loan 
B) Line of credit 
C) Compensating balance 
D) Inventory loan

Question 11

Why do firms offer customers discounts for paying early?

Accepted Answer

A) If customers pay early, the firm increases the likelihood of being paid. 
B) If customers pay early, the firm's cash cycle is shortened. 
C) If customers pay early, the firm improves its credit policy. 
D) All of the above are reasons firms offer customers discounts for paying early. 
A) If customers pay early, the firm increases the likelihood of being paid. 
B) If customers pay early, the firm's cash cycle is shortened. 
C) If customers pay early, the firm improves its credit policy. 
D) All of the above are reasons firms offer customers discounts for paying early.

Question 12

CM Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and three more days for the check to clear once they're deposited.What is their collection float?

Accepted Answer

A) 11 days 
B) 10 days 
C) 8 days 
D) 7 days 
A) 11 days 
B) 10 days 
C) 8 days 
D) 7 days

Question 13

If a firm has a cash cycle of 38 days and an operating cycle of 82 days,what is its payables turnover?

Accepted Answer

A) 8.79 
B) 8.30 
C) 9.53 
D) 10.89 
A) 8.79 
B) 8.30 
C) 9.53 
D) 10.89

Question 14

MC Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,two day for the payments to be processed and deposited by their bookkeeping department,and three more days for the checks to clear once they're deposited.What is their collection float?

Accepted Answer

A) 12 days 
B) 10 days 
C) 9 days 
D) 7 days 
A) 12 days 
B) 10 days 
C) 9 days 
D) 7 days

Question 15

Which of the following is NOT an example of an inventory loan?

Accepted Answer

A) Blanket inventory liens 
B) Trust receipts 
C) Field warehousing financing 
D) Inventory factor 
A) Blanket inventory liens 
B) Trust receipts 
C) Field warehousing financing 
D) Inventory factor

Question 16

Which of the following is NOT one of the Baumol Model's unrealistic assumptions?

Accepted Answer

A) The firm has a constant, perfectly predictable distribution rate for cash. 
B) No cash will come in during the period in question. 
C) No allowance for any safety stock of extra cash to buffer the firm against unexpectedly high demand for cash. 
D) No assumption to start from a replenishment level of cash then decline smoothly to a value of zero. 
A) The firm has a constant, perfectly predictable distribution rate for cash. 
B) No cash will come in during the period in question. 
C) No allowance for any safety stock of extra cash to buffer the firm against unexpectedly high demand for cash. 
D) No assumption to start from a replenishment level of cash then decline smoothly to a value of zero.

Question 17

BOGO Shoes would like to maintain their cash account at a minimum level of $100,000,but expects the standard deviation in net daily cash flows to be $7,000; the effective annual rate on marketable securities to be 6.5 percent per year; and the trading cost per sale or purchase of marketable securities to be $175 per transaction.What will be their optimal cash return point?

Accepted Answer

A) $107,000 
B) $133,374.63 
C) $144,266.52 
D) $101,859.65 
A) $107,000 
B) $133,374.63 
C) $144,266.52 
D) $101,859.65

Question 18

CM Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and three more days for the checks to clear once they're deposited.What is their collection float?

Accepted Answer

A) 7 days 
B) 8 days 
C) 10 days 
D) 11 days 
A) 7 days 
B) 8 days 
C) 10 days 
D) 11 days

Question 19

If a firm has a cash cycle of 41 days and an operating cycle of 76 days,what is its average payment period?

Accepted Answer

A) 52 days 
B) 29 days 
C) 117 days 
D) 35 days 
A) 52 days 
B) 29 days 
C) 117 days 
D) 35 days

Question 20

Which of the following is NOT one of the "five C's" of credit analysis?

Accepted Answer

A) Capacity 
B) Character 
C) Collateral 
D) Collectability 
A) Capacity 
B) Character 
C) Collateral 
D) Collectability

Operating cycle is measured as:

What effect does increasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

The operating cycle will decrease with all of the following changes EXCEPT:

If a firm has a cash cycle of 18 days and an operating cycle of 29 days,what is its payables turnover?

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and:

Which of the following is defined as the cost or forgone opportunity of using an asset already in use by the firm,or a person already employed by the firm,in a new project?

A production strategy that attempts to improve a firm's return on investment by reducing in-process inventory and associated carrying costs as much as possible is which of the following?

If a firm has a cash cycle of 25 days and an operating cycle of 80 days,what is its average payment period?

B&B Cos.has sales of $732,000 and cost of goods sold of $323,000.The firm had a beginning inventory of $48,000 and an ending inventory of $39,000.What is the length of the days' sales in inventory?

Which of these is the requirement of the firm to keep a certain percentage of the borrowed money deposited in the firm's bank accounts,whereby the bank agrees to lend money to the firm?

Why do firms offer customers discounts for paying early?

CM Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and three more days for the check to clear once they're deposited.What is their collection float?

If a firm has a cash cycle of 38 days and an operating cycle of 82 days,what is its payables turnover?

MC Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,two day for the payments to be processed and deposited by their bookkeeping department,and three more days for the checks to clear once they're deposited.What is their collection float?

Which of the following is NOT an example of an inventory loan?

Which of the following is NOT one of the Baumol Model's unrealistic assumptions?

CM Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and three more days for the checks to clear once they're deposited.What is their collection float?

If a firm has a cash cycle of 41 days and an operating cycle of 76 days,what is its average payment period?

Which of the following is NOT one of the "five C's" of credit analysis?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 14: Working Capital and Policies

Operating cycle is measured as:

What effect does increasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

The operating cycle will decrease with all of the following changes EXCEPT:

If a firm has a cash cycle of 18 days and an operating cycle of 29 days,what is its payables turnover?

Choosing the optimal level of investment in each current asset type involves a trade-off between carry costs and:

Which of the following is defined as the cost or forgone opportunity of using an asset already in use by the firm,or a person already employed by the firm,in a new project?

A production strategy that attempts to improve a firm's return on investment by reducing in-process inventory and associated carrying costs as much as possible is which of the following?

If a firm has a cash cycle of 25 days and an operating cycle of 80 days,what is its average payment period?

B&B Cos.has sales of $732,000 and cost of goods sold of $323,000.The firm had a beginning inventory of $48,000 and an ending inventory of $39,000.What is the length of the days' sales in inventory?

Which of these is the requirement of the firm to keep a certain percentage of the borrowed money deposited in the firm's bank accounts,whereby the bank agrees to lend money to the firm?

Why do firms offer customers discounts for paying early?

CM Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and three more days for the check to clear once they're deposited.What is their collection float?

If a firm has a cash cycle of 38 days and an operating cycle of 82 days,what is its payables turnover?

MC Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,two day for the payments to be processed and deposited by their bookkeeping department,and three more days for the checks to clear once they're deposited.What is their collection float?

Which of the following is NOT an example of an inventory loan?

Which of the following is NOT one of the Baumol Model's unrealistic assumptions?

CM Enterprises estimates that it takes,on average,seven days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and three more days for the checks to clear once they're deposited.What is their collection float?

If a firm has a cash cycle of 41 days and an operating cycle of 76 days,what is its average payment period?

Which of the following is NOT one of the "five C's" of credit analysis?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters