Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle? $\begin{array}{lr} \text { Annual sales }= & \$ 45,000 \\ \text { Annual cost of goods sold }= & \$ 30,000 \\ \text { Inventory }= & \$ 4,500 \\ \text { Accounts receivable }= & \$ 1,800 \\ \text { Accounts payable }= & \$ 2,500 \end{array}$

A) 28 days B) 32 days C) 35 days D) 39 days E) 43 days A) 28 days B) 32 days C) 35 days D) 39 days E) 43 days

A) used to identify inventory safety stocks. B) used to slow down the collection of checks our firm writes. C) used to speed up the collection of checks received. D) used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks. E) used to protect cash, i.e., to keep it from being stolen. A) used to identify inventory safety stocks. B) used to slow down the collection of checks our firm writes. C) used to speed up the collection of checks received. D) used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks. E) used to protect cash, i.e., to keep it from being stolen.

Fireside Inc. has the following data. What is the firm's cash conversion cycle? $\begin{array}{lccc} \text { Inventory conversion period = }& 38 days\\ \text { Average collection period = }& 19 days \\ \text { Payables deferral period = }& 20 day \end{array}$

A) 33 days B) 37 days C) 41 days D) 45 days E) 49 days A) 33 days B) 37 days C) 41 days D) 45 days E) 49 days

Exam 21: Supply Chains and Working Capital Management

Since depreciation is a non-cash charge, it neither appears on nor has any effect on the cash budget. Thus, if the depreciation charge for the coming year doubled or halved, this would have no effect on the cash budget.

(True/False)

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Question 101

Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle? Annual sales = \ 45,000 Annual cost of goods sold = \ 30,000 Inventory = \ 4,500 Accounts receivable = \ 1,800 Accounts payable = \ 2,500

(Multiple Choice)

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Question 102

Baltimore Baking is preparing its cash budget and expects to have sales of $30,000 in January, $35,000 in February, and $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, what are the expected cash receipts for March?

(Multiple Choice)

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Question 103

Noddings Inc. needs to raise more capital because its business is booming. The company purchases supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.)

(Multiple Choice)

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Question 104

Determining a firm's optimal investment in working capital and deciding how that investment should be financed are critical to working capital management.

(True/False)

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Question 105

A promissory note is the document signed when a bank loan is executed, and it specifies financial aspects of the loan.

(True/False)

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Question 106

Taylor Textbooks Inc. buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $450,000 per year. On average, what is the dollar amount of costly trade credit (total credit σ free credit) the firm receives during the year? (Assume a 365-day year, and note that purchases are net of discounts.)

(Multiple Choice)

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Question 107

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 108

The aging schedule is a commonly used method for monitoring receivables.

(True/False)

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Question 109

A revolving credit agreement is a formal line of credit. The firm must generally pay a fee on the unused balance of the committed funds to compensate the bank for the commitment to extend those funds.

(True/False)

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Question 110

A lockbox plan is

(Multiple Choice)

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Question 111

Fireside Inc. has the following data. What is the firm's cash conversion cycle? Inventory conversion period = 38days Average collection period = 19days Payables deferral period = 20day

(Multiple Choice)

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Question 112

Trade credit can be separated into two components: free trade credit, which is credit received after the discount period ends, and costly trade credit, which is the cost of discounts not taken.

(True/False)

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Question 113

Freeman Builders, Inc. buys on terms of 2/15, net 30. It does not take discounts, and it typically pays 60 days after the invoice date. Net purchases amount to $720,000 per year. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

(Multiple Choice)

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Question 114

The maturity matching, or "self-liquidating," approach to financing involves obtaining the funds for permanent current assets with a combination of long-term capital and short-term capital that varies depending on the level of interest rates. When short-term rates are relatively high, short-term assets will be financed with long-term debt to reduce costs.

(True/False)

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Question 115

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 116

Blueroot Inc. is considering a change in its financing policy. Currently, it uses maximum trade credit by not taking discounts on its purchases. The standard industry credit terms offered by all its suppliers are 2/10 net 30 days, and the firm pays on time. The new CFO is considering borrowing from its bank, using short-term notes payable, and then taking discounts. The firm wants to determine the effect of this policy change on its net income. Its net purchases are $11,760 per day, using a 365-day year. The interest rate on the notes payable is 10%, and the tax rate is 40%. If the firm implements the plan, what is the expected change in net income?

(Multiple Choice)

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Question 117

Firms hold cash balances in order to complete transactions (both routine and precautionary) that are necessary in business operations and as compensation to banks for providing loans and services.

(True/False)

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Question 118

If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period.

(True/False)

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Question 119

Fairweather Corporation purchases merchandise on terms of 2/15, net 40, and its gross purchases (i.e., purchases before taking off the discount) are $800,000 per year. What is the maximum dollar amount of costly trade credit the firm could get, assuming it abides by the supplier's credit terms?(Assume a 365-day year.)

(Multiple Choice)

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Question 120

Showing 101 - 120 of 131

Exam 21: Supply Chains and Working Capital Management

Since depreciation is a non-cash charge, it neither appears on nor has any effect on the cash budget. Thus, if the depreciation charge for the coming year doubled or halved, this would have no effect on the cash budget.

Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle? Annual sales = \ 45,000 Annual cost of goods sold = \ 30,000 Inventory = \ 4,500 Accounts receivable = \ 1,800 Accounts payable = \ 2,500

Determining a firm's optimal investment in working capital and deciding how that investment should be financed are critical to working capital management.

A promissory note is the document signed when a bank loan is executed, and it specifies financial aspects of the loan.

Which of the following statements is CORRECT?

The aging schedule is a commonly used method for monitoring receivables.

A revolving credit agreement is a formal line of credit. The firm must generally pay a fee on the unused balance of the committed funds to compensate the bank for the commitment to extend those funds.

A lockbox plan is

Fireside Inc. has the following data. What is the firm's cash conversion cycle? Inventory conversion period = 38days Average collection period = 19days Payables deferral period = 20day

Trade credit can be separated into two components: free trade credit, which is credit received after the discount period ends, and costly trade credit, which is the cost of discounts not taken.

Freeman Builders, Inc. buys on terms of 2/15, net 30. It does not take discounts, and it typically pays 60 days after the invoice date. Net purchases amount to $720,000 per year. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

Which of the following statements is CORRECT?

Firms hold cash balances in order to complete transactions (both routine and precautionary) that are necessary in business operations and as compensation to banks for providing loans and services.

If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period.

An Overview of Financial Management and the Financial Environment

Risk and Return-Part I

Risk and Return-Part II

Bond Valuation

Financial Options

Accounting for Financial Management

Analysis of Financial Statements

Basic Stock Valuation

Corporate Valuation and Financial Planning

Corporate Governance

Determining the Cost of Capital

Capital Budgeting: Decision Criteria

Capital Budgeting-Estimating Cash Flows and Analyzing Risk

Real Options

Distributions to Shareholders-Dividends and Repurchases

Capital Structure Decisions

Dynamic Capital Structures and Corporate Valuation

Initial Public Offerings-Investment Banking: and Financial Restructuring

Lease Financing

Hybrid Financing Preferred Stock-Warrants and Convertibles

Providing and Obtaining Credit

Other Topics in Working Capital Management

Enterprise Risk Management

Bankruptcy-Reorganization and Liquidation

Mergers and Corporate Control

Multinational Financial Management

Time Value of Money

Basic Financial Tools: A review

Pension Plan Management

Financial Management in Not for Profit Businesses

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