Question 1

Short-term debt is frequently less expensive because it provides the borrower more security.

Accepted Answer

A) True 
 B)False

Question 2

King Co.'s inventory turnover ratio is 12.Its inventory conversion period is

Accepted Answer

A) 12 days. 
B) 30.4 days. 
C) 2.5 days. 
D) There is not enough information. 
A) 12 days. 
B) 30.4 days. 
C) 2.5 days. 
D) There is not enough information.

Question 3

Spontaneous sources of financing include

Accepted Answer

A) marketable securities. 
B) accruals. 
C) bonds. 
D) commercial paper. 
A) marketable securities. 
B) accruals. 
C) bonds. 
D) commercial paper.

Question 4

Which of the following comparisons between short-term bank loans is correct?

Accepted Answer

A) Commercial paper interest rates are usually slightly higher than rates on bank loans. 
B) Commercial paper is only appropriate for firms requiring a limited amount of short-term financing,while banks can offer substantially larger amounts of funds. 
C) Banks demand that borrowers meet exacting credit-worthiness tests,while the lenders that purchase commercial paper are less strict.Only the most credit-worthy borrowers have access to bank loans. 
D) Commercial paper is less flexible than a line of credit,but the interest rate is lower. 
A) Commercial paper interest rates are usually slightly higher than rates on bank loans. 
B) Commercial paper is only appropriate for firms requiring a limited amount of short-term financing,while banks can offer substantially larger amounts of funds. 
C) Banks demand that borrowers meet exacting credit-worthiness tests,while the lenders that purchase commercial paper are less strict.Only the most credit-worthy borrowers have access to bank loans. 
D) Commercial paper is less flexible than a line of credit,but the interest rate is lower.

Question 5

Accrued wages and taxes provide sources of financing that rise and fall spontaneously with the level of the firm's sales.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT considered a permanent source of financing?

Accepted Answer

A) Corporate bonds 
B) Common stock 
C) Preferred stock 
D) Commercial paper 
A) Corporate bonds 
B) Common stock 
C) Preferred stock 
D) Commercial paper

Question 7

Abbot Corporation has an average collection period of 49 days,an inventory conversion period of 83 days,and a payables deferrable period of 36 days.What is Abbott's operating cycle?

Accepted Answer

A) 96 days 
B) 70 days 
C) 85 days 
D) 132 days 
A) 96 days 
B) 70 days 
C) 85 days 
D) 132 days

Question 8

Which of the following is an advantage of trade credit?

Accepted Answer

A) Trade credit is conveniently obtained as a normal part of the firm's operations. 
B) No formal agreements are generally involved in extending credit. 
C) The amount of credit extended expands and contracts with the needs of the firm. 
D) All of the above. 
A) Trade credit is conveniently obtained as a normal part of the firm's operations. 
B) No formal agreements are generally involved in extending credit. 
C) The amount of credit extended expands and contracts with the needs of the firm. 
D) All of the above.

Question 9

Bank Two extends a $3 million line of credit to Capital Corp.The stated rate of interest is 9.5%.Bank Two requires Capital to maintain compensating balances equal to 10% of the amount of the line.Assuming that Capital would not normally carry any deposits at the bank,what is the effective annual rate of interest on the loan?

Accepted Answer

A) 9.5% 
B) 10.6% 
C) 11.6% 
D) 12.3% 
A) 9.5% 
B) 10.6% 
C) 11.6% 
D) 12.3%

Question 10

Which of the following would be considered an issue that is related to the management of working capital?

Accepted Answer

A) How much inventory should the firm maintain? 
B) How should a firm finance its current assets? 
C) To whom should the firm grant trade credit? 
D) All of the above 
A) How much inventory should the firm maintain? 
B) How should a firm finance its current assets? 
C) To whom should the firm grant trade credit? 
D) All of the above

Short-term debt is frequently less expensive because it provides the borrower more security.

King Co.'s inventory turnover ratio is 12.Its inventory conversion period is

Spontaneous sources of financing include

Which of the following comparisons between short-term bank loans is correct?

Accrued wages and taxes provide sources of financing that rise and fall spontaneously with the level of the firm's sales.

Which of the following is NOT considered a permanent source of financing?

Abbot Corporation has an average collection period of 49 days,an inventory conversion period of 83 days,and a payables deferrable period of 36 days.What is Abbott's operating cycle?

Which of the following is an advantage of trade credit?

Which of the following would be considered an issue that is related to the management of working capital?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

International Business Finance

Corporate Risk Management

Filters

Exam 18: Working Capital Management

Short-term debt is frequently less expensive because it provides the borrower more security.

King Co.'s inventory turnover ratio is 12.Its inventory conversion period is

Spontaneous sources of financing include

Which of the following comparisons between short-term bank loans is correct?

Accrued wages and taxes provide sources of financing that rise and fall spontaneously with the level of the firm's sales.

Which of the following is NOT considered a permanent source of financing?

Abbot Corporation has an average collection period of 49 days,an inventory conversion period of 83 days,and a payables deferrable period of 36 days.What is Abbott's operating cycle?

Which of the following is an advantage of trade credit?

Which of the following would be considered an issue that is related to the management of working capital?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

International Business Finance

Corporate Risk Management

Filters