Question 1

The cash cycle equals the:

Accepted Answer

A)  inventory period plus the accounts receivable period.
B)  inventory period plus the accounts payable period.
C)  operating cycle minus the inventory period.
D)  operating cycle minus the accounts payable period.
E)  operating cycle minus the accounts receivable period. D

Question 2

AW Jones has annual sales of $2.438 million.The cost of goods sold is equal to 81 percent of sales.The average accounts receivable balance is $197,800 and the average accounts payable balance is $205,735.How many days on average does it take the firm to pay its suppliers?

Accepted Answer

A)  30.83days
B)  45.22 days
C)  41.31 days
D)  38.03 days
E)  29.61days D

Question 3

Theo's has estimated quarterly sales, starting with Quarter 1, of $9,800, $10,700, $12,400, and $14,600.Purchases are equal to 66 percent of the following quarter's sales and are payable in 90 days.Assume there are 30 days in each month.How much will Theo's pay its suppliers in the third quarter?

Accepted Answer

A)  $9,636
B)  $7,656
C)  $8,184
D)  $8,420
E)  $9,860 C

Question 4

Which of the following are sources of cash?
I.Decreasing accounts receivable
II.Increasing inventory
III.Increasing accounts payable
IV.Increasing common stock

Accepted Answer

A)  I and III only
B)  II and IV only
C)  II and III only
D)  I and IV only
E)  I, III, and IV only

Question 5

Geoff's Entertainment has a receivables turnover rate of 17.8 a payables turnover rate of 12.5 and an inventory turnover rate of 24.9.What is the length of the firm's operating cycle?

Accepted Answer

A)  34.89 days
B)  39.80 days
C)  35.61 days
D)  43.86 days
E)  49.71 days

Question 6

Which one of these will increase the operating cycle?

Accepted Answer

A)  Decreasing the days' sales in inventory
B)  Decreasing the accounts payable period
C)  Increasing the accounts receivable turnover rate
D)  Decreasing the inventory turnover rate
E)  Decreasing the accounts payable turnover rate

Question 7

Which one of the following is a use of cash?

Accepted Answer

A)  Selling inventory at cost
B)  Paying a supplier for inventory you purchased last month
C)  Borrowing money from a local bank
D)  Collecting payment from a customer
E)  Selling a fixed asset such as a piece of machinery

Question 8

Show Place Decor has estimated quarterly sales for next year, starting with Quarter 1, of $38,600, $53,400, $48,900, and $69,800.Purchases are equal to 62 percent of the following quarter's sales and the accounts payable period is 30 days.Assume each month has 30 days.What is the estimated accounts payable balance at the end of Quarter 2?

Accepted Answer

A)  $10,106
B)  $9,520
C)  $11,624
D)  $14,425
E)  $14,200

Question 9

Which of these is most apt to decrease the accounts receivable period for a store that has both cash and credit sales?

Accepted Answer

A)  Increasing the time granted to customers to pay for purchases
B)  Lengthening the cash cycle
C)  Increasing customer discounts for cash payment
D)  Selling inventory slower
E)  Paying suppliers faster

Question 10

Birdview Construction has the following current account values.These accounts represent a net _____ of cash for the period in the amount of ____.

Accepted Answer

A)  source; $3,100
B)  source; $100
C)  use; $100
D)  source; $3,200
E)  use; $3,200

Question 11

Steep Mountain Oil has a cash balance of $15and a short-term loan balance of $53 at the beginning of Q1.The net cash outflow for Q1of $39and for Q2 there is a net cash inflow of $23.All cash shortfalls are funded with short-term debt.The firm pays 1.1 percent of its prior quarter's ending loan balance as interest each quarter.The minimum cash balance is $15.What is the short-term loan balance at the end of the Q2?

Accepted Answer

A)  $70.6
B)  $81.3
C)  $65.9
D)  $67.7
E)  $76.8

Question 12

The Cash and Grab Market has annual sales of $913,200 and cost of goods sold of $681,600.The profit margin is 3.8 percent and the accounts payable period is 24 days.What is the average accounts payable balance?

Accepted Answer

A)  $64,818
B)  $55,488
C)  $44,818
D)  $60,211
E)  $60,046

Question 13

Which of these is a use of cash?

Accepted Answer

A)  Issuing new shares of stock
B)  Decreasing accounts receivable
C)  Decreasing inventory
D)  Decreasing fixed assets
E)  Decreasing accounts payable

Question 14

Red Barn has estimated quarterly sales, starting with Quarter 1, of $42,600, $45,300, $44,800, and $42,700.Purchases are equal to 71 percent of the following quarter's sales.The accounts receivable period is 30 days and the accounts payable period is 45 days.Assume there are 30 days in each month.By how much will the firm's collections exceed its payments for Quarter 3?

Accepted Answer

A)  $14,088.86
B)  $11,884.33
C)  $13,904.17
D)  $12,925.86
E)  $12,211.17

Question 15

Kar's currently has a 208-day operating cycle.The company is concentrating on increasing its inventory turnover rate from 7.9 to 8.2 times.What will the firm's new operating cycle be if it can effectively make this change?

Accepted Answer

A)  206.31 days
B)  209.69 days
C)  207.14 days
D)  208.86 days
E)  207.64 days

Question 16

The Warehouse has projected sales for June through September of $56,700, $68,900, $70,200, and $54,300.The company collects 46 percent of its sales in the month of sale, 51 percent in the month following the month of sale, and 2 percent in the second month following the month of sale.The remaining sales are never collected.What is the amount of the August collections?

Accepted Answer

A)  $65,863
B)  $68,565
C)  $62,158
D)  $67,288
E)  $65,516

Question 17

The Green Pickle has estimated quarterly sales for next year, starting with Quarter I, of $18,600, $21,300, $24,500, and $19,600.The accounts receivable period is 18 days.What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days.

Accepted Answer

A)  $4,333
B)  $4,900
C)  $4,500
D)  $4,667
E)  $4,600

Question 18

The accounts receivable turnover rate for Tiger Uniform has gone from an average of 14.1 times to 15.6 times per year.How has this change affected the firm's accounts receivable period?

Accepted Answer

A)  Decrease of 1.98 days
B)  Decrease of 2.49 days
C)  Decrease of 3.28 days
D)  Increase of 2.49 days
E)  Increase of 3.08 days

Question 19

Which of these actions is indicative of a restrictive short-term financial policy?

Accepted Answer

A)  Granting increasing amounts of credit to customers
B)  Expanding the number of inventory items carried
C)  Increasing the firm's investment in the current accounts
D)  Minimizing the cash balances held by the firm
E)  Investing relatively large amounts in marketable securities

Question 20

Holiday Tree Farm has a cash balance of $34 and a short-term loan balance of $180 at the beginning of Q1.The net cash inflow for the first quarter is $36 and for the second quarter there is a net cash outflow of $48.All cash shortfalls are funded with short-term debt.The firm pays 2 percent of its prior quarter's ending loan balance as interest each quarter.The minimum cash balance is $20.What is the short-term loan balance at the end of Q2?

Accepted Answer

A)  $184.3
B)  $179.2
C)  $138.6
D)  $128.4
E)  $193.1

Exam 16: Short-Term Financial Planning