Question 1

A firm wants to reduce its cash cycle.Which of the following actions will reduce its cash cycle?

Accepted Answer

A)  The firm reduces its DSO. 
B)  The firm increases its inventory. 
C)  The firm reduces its accounts payable. 
D)  All of the options are actions that will reduce its cash cycle. 
A)  The firm reduces its DSO. 
B)  The firm increases its inventory. 
C)  The firm reduces its accounts payable. 
D)  All of the options are actions that will reduce its cash cycle.

Question 2

All of the following will result in an increase in net working capital EXCEPT:

Accepted Answer

A)  an increase in inventory. 
B)  a decrease in accounts payable. 
C)  an increase in cash. 
D)  an increase in accruals. 
A)  an increase in inventory. 
B)  a decrease in accounts payable. 
C)  an increase in cash. 
D)  an increase in accruals.

Question 3

If a firm has a cash cycle of 32 days and an operating cycle of 52 days,what is its payables turnover?

Accepted Answer

A)  7.02 
B)  11.41 
C)  18.25 
D)  20.00 
A)  7.02 
B)  11.41 
C)  18.25 
D)  20.00

Question 4

BK Industries has sales of $500,000 and cost of goods sold of $230,000.The firm had a beginning inventory of $10,000 and an ending inventory of $15,000.What is the length of the days' sales in inventory?

Accepted Answer

A)  10.95 days 
B)  15.87 days 
C)  19.84 days 
D)  23.80 days 
A)  10.95 days 
B)  15.87 days 
C)  19.84 days 
D)  23.80 days

Question 5

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

Accepted Answer

A)  Lockbox system 
B)  Concentration banking 
C)  Wire transfers 
D)  Fedwire 
A)  Lockbox system 
B)  Concentration banking 
C)  Wire transfers 
D)  Fedwire

Question 6

Which of these is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand?

Accepted Answer

A)  Liquid current assets 
B)  Safety stock 
C)  Overnight securities 
D)  Float 
A)  Liquid current assets 
B)  Safety stock 
C)  Overnight securities 
D)  Float

Question 7

Why would a firm ever use short-term debt to finance permanent current assets?

Accepted Answer

A)  This would be illogical and is rarely observed. 
B)  This would occur if short-term rates were much lower than long-term rates. 
C)  This would only occur if the managers were very conservative. 
D)  None of the options. 
A)  This would be illogical and is rarely observed. 
B)  This would occur if short-term rates were much lower than long-term rates. 
C)  This would only occur if the managers were very conservative. 
D)  None of the options.

Question 8

If a firm has a cash cycle of 18 days and an operating cycle of 34 days,what is its payables turnover?

Accepted Answer

A)  16.00 
B)  20.28 
C)  22.81 
D)  34.00 
A)  16.00 
B)  20.28 
C)  22.81 
D)  34.00

Question 9

Team Sports Industries has a cash balance of $60,000; accounts payable of $40,000; inventory of $100,000; accounts receivable of $110,000; notes payable of $80,000; and accrued wages and taxes of $10,000.How much net working capital does the firm need to fund?

Accepted Answer

A)  $140,000 
B)  $130,000 
C)  $150,000 
D)  $210,000 
A)  $140,000 
B)  $130,000 
C)  $150,000 
D)  $210,000

Question 10

Suppose your firm is seeking a seven-year,amortizing $400,000 loan with annual payments and your bank is offering you the choice between a $410,000 loan with a $10,000 compensating balance and a $400,000 loan without a compensating balance.If the interest rate on the $400,000 loan is 9.5 percent,how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

Accepted Answer

A)  The rate would have to be lower than 8.76 percent. 
B)  The rate would have to be lower than 8.29 percent. 
C)  The rate would have to be lower than 8.14 percent. 
D)  The rate would have to be lower than 7.99 percent. 
A)  The rate would have to be lower than 8.76 percent. 
B)  The rate would have to be lower than 8.29 percent. 
C)  The rate would have to be lower than 8.14 percent. 
D)  The rate would have to be lower than 7.99 percent.

Question 11

JohnBoy Industries has a cash balance of $59,000; accounts payable of $139,000; inventory of $115,000; accounts receivable of $220,000; notes payable of $175,000; and accrued wages and taxes of $23,000.How much net working capital does the firm need to fund?

Accepted Answer

A)  $140,000 
B)  $34,000 
C)  −$25,000 
D)  $57,000 
A)  $140,000 
B)  $34,000 
C)  −$25,000 
D)  $57,000

Question 12

Which of these is the period of time after a check has been written,but not yet cleared and deposited?

Accepted Answer

A)  Liquid current assets 
B)  Safety stock 
C)  Overnight securities 
D)  Float 
A)  Liquid current assets 
B)  Safety stock 
C)  Overnight securities 
D)  Float

Question 13

Scribble,Inc.has sales of $100,000 and cost of goods sold of $75,000.The firm had a beginning inventory of $20,000 and an ending inventory of $22,000.What is the length of the days' sales in inventory?

Accepted Answer

A)  73.00 days 
B)  83.30 days 
C)  97.34 days 
D)  107.07 days 
A)  73.00 days 
B)  83.30 days 
C)  97.34 days 
D)  107.07 days

Question 14

Happy Feet would like to maintain their cash account at a minimum level of $75,000,but expects the standard deviation in net daily cash flows to be $5,000; the effective annual rate on marketable securities to be 7 percent per year; and the trading cost per sale or purchase of marketable securities to be $150 per transaction.What will be their optimal cash return point?

Accepted Answer

A)  $80,000.00 
B)  $99,755.64 
C)  $76,593.42 
D)  $82,548.18 
A)  $80,000.00 
B)  $99,755.64 
C)  $76,593.42 
D)  $82,548.18

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

Would it be worth it to incur a compensating balance of $10,000 in order to get a 1-percent-lower interest rate on a 1-year,pure discount loan of $500,000?

Accepted Answer

A)  Yes 
B)  No 
C)  Not enough information is given to know 
A)  Yes 
B)  No 
C)  Not enough information is given to know

Question 17

If demand for a firm's products suddenly increases so that inventory decreases while sales increase,how will the firm's needs for net working capital react?

Accepted Answer

A)  Net working capital would increase. 
B)  Net working capital would decrease. 
C)  There would be no change in net working capital. 
D)  Net working capital would first decrease, then increase slowly over time. 
A)  Net working capital would increase. 
B)  Net working capital would decrease. 
C)  There would be no change in net working capital. 
D)  Net working capital would first decrease, then increase slowly over time.

Question 18

Rose Resources faces a smooth annual demand for cash of $10 million; incurs transaction costs of $325 every time they sell marketable securities; and can earn 3.9 percent on their marketable securities.What will be their optimal cash replenishment level?

Accepted Answer

A)  $28,867.51 
B)  $288,675.13 
C)  $40,824.83 
D)  $408,248.29 
A)  $28,867.51 
B)  $288,675.13 
C)  $40,824.83 
D)  $408,248.29

Question 19

Which of the following resemble checks,but differ in that they are payable by the firm issuing them rather than payable by a bank?

Accepted Answer

A)  Drafts 
B)  Concentration banking 
C)  Wire transfers 
D)  Zero-balance account 
A)  Drafts 
B)  Concentration banking 
C)  Wire transfers 
D)  Zero-balance account

Question 20

Suppose that Dunn Industries has annual sales of $2.5 million,cost of goods sold of $1,850,000,average inventories of $1,900,000,and average accounts receivable of $660,000.Assuming that all of Dunn's sales are on credit,what will be the firm's operating cycle?

Accepted Answer

A)  471.22 days 
B)  374.86 days 
C)  418.61 days 
D)  515.39 days 
A)  471.22 days 
B)  374.86 days 
C)  418.61 days 
D)  515.39 days

A firm wants to reduce its cash cycle.Which of the following actions will reduce its cash cycle?

All of the following will result in an increase in net working capital EXCEPT:

If a firm has a cash cycle of 32 days and an operating cycle of 52 days,what is its payables turnover?

BK Industries has sales of $500,000 and cost of goods sold of $230,000.The firm had a beginning inventory of $10,000 and an ending inventory of $15,000.What is the length of the days' sales in inventory?

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

Which of these is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand?

Why would a firm ever use short-term debt to finance permanent current assets?

If a firm has a cash cycle of 18 days and an operating cycle of 34 days,what is its payables turnover?

Team Sports Industries has a cash balance of $60,000; accounts payable of $40,000; inventory of $100,000; accounts receivable of $110,000; notes payable of $80,000; and accrued wages and taxes of $10,000.How much net working capital does the firm need to fund?

JohnBoy Industries has a cash balance of $59,000; accounts payable of $139,000; inventory of $115,000; accounts receivable of $220,000; notes payable of $175,000; and accrued wages and taxes of $23,000.How much net working capital does the firm need to fund?

Which of these is the period of time after a check has been written,but not yet cleared and deposited?

Scribble,Inc.has sales of $100,000 and cost of goods sold of $75,000.The firm had a beginning inventory of $20,000 and an ending inventory of $22,000.What is the length of the days' sales in inventory?

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

Would it be worth it to incur a compensating balance of $10,000 in order to get a 1-percent-lower interest rate on a 1-year,pure discount loan of $500,000?

If demand for a firm's products suddenly increases so that inventory decreases while sales increase,how will the firm's needs for net working capital react?

Rose Resources faces a smooth annual demand for cash of $10 million; incurs transaction costs of $325 every time they sell marketable securities; and can earn 3.9 percent on their marketable securities.What will be their optimal cash replenishment level?

Which of the following resemble checks,but differ in that they are payable by the firm issuing them rather than payable by a bank?

Suppose that Dunn Industries has annual sales of $2.5 million,cost of goods sold of $1,850,000,average inventories of $1,900,000,and average accounts receivable of $660,000.Assuming that all of Dunn's sales are on credit,what will be the firm's operating cycle?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

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

Filters

Exam 14: Working Capital Management and Policies

A firm wants to reduce its cash cycle.Which of the following actions will reduce its cash cycle?

All of the following will result in an increase in net working capital EXCEPT:

If a firm has a cash cycle of 32 days and an operating cycle of 52 days,what is its payables turnover?

BK Industries has sales of $500,000 and cost of goods sold of $230,000.The firm had a beginning inventory of $10,000 and an ending inventory of $15,000.What is the length of the days' sales in inventory?

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

Which of these is defined as the excess amounts of a current asset kept on hand to meet unexpected shocks in demand?

Why would a firm ever use short-term debt to finance permanent current assets?

If a firm has a cash cycle of 18 days and an operating cycle of 34 days,what is its payables turnover?

Team Sports Industries has a cash balance of $60,000; accounts payable of $40,000; inventory of $100,000; accounts receivable of $110,000; notes payable of $80,000; and accrued wages and taxes of $10,000.How much net working capital does the firm need to fund?

JohnBoy Industries has a cash balance of $59,000; accounts payable of $139,000; inventory of $115,000; accounts receivable of $220,000; notes payable of $175,000; and accrued wages and taxes of $23,000.How much net working capital does the firm need to fund?

Which of these is the period of time after a check has been written,but not yet cleared and deposited?

Scribble,Inc.has sales of $100,000 and cost of goods sold of $75,000.The firm had a beginning inventory of $20,000 and an ending inventory of $22,000.What is the length of the days' sales in inventory?

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

Would it be worth it to incur a compensating balance of $10,000 in order to get a 1-percent-lower interest rate on a 1-year,pure discount loan of $500,000?

If demand for a firm's products suddenly increases so that inventory decreases while sales increase,how will the firm's needs for net working capital react?

Rose Resources faces a smooth annual demand for cash of $10 million; incurs transaction costs of $325 every time they sell marketable securities; and can earn 3.9 percent on their marketable securities.What will be their optimal cash replenishment level?

Which of the following resemble checks,but differ in that they are payable by the firm issuing them rather than payable by a bank?

Suppose that Dunn Industries has annual sales of $2.5 million,cost of goods sold of $1,850,000,average inventories of $1,900,000,and average accounts receivable of $660,000.Assuming that all of Dunn's sales are on credit,what will be the firm's operating cycle?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

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

Filters