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Exam 17: Working Capital Management

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Question 21

Multiple Choice

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The primary purpose of a cash discount is to:

A) compensate customers for an out-of-stock item.
B) compensate customers for faulty goods or services.
C) offset the interest charges on an account receivable.
D) induce customers to pay promptly.
E) induce customers to purchase specialty items.

F) C) and E)
G) D) and E)

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Question 22

Multiple Choice

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The primary goal of inventory management is to minimize the:

A) number of orders per year.
B) average inventory level.
C) total costs of holding inventory.
D) level of inventory for the most expensive items.
E) total opportunity costs.

F) A) and E)
G) A) and D)

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Question 23

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On any given day, a firm receives and deposits numerous checks worth an average combined total of $9,215.The funds from the deposited checks are generally available after two days.Every day, the firm mails out checks totaling $7,300 that generally take three days to clear the bank.What is the amount of the collection float if the opening bank balance was $9,200?

Which one of the following best illustrates the concept of derived demand?

As of this morning, a firm had a ledger balance of $1,252 with no outstanding deposits or checks.Today, the firm deposited three checks in the amount of $63 each and wrote a check in the amount of $235.What is the amount of the collection float as of the end of the day assuming none of these checks had cleared?

Which of these are money market securities? I.Jumbo CDs II.Short-term municipal debt III.U.S.Treasury bills IV.Commercial paper

Which characteristic generally applies to commercial paper?

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

The transaction motive refers to the need to hold cash:

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

The process of determining the probability that potential customers will not pay is called:

The Flowering Vine buys hanging plants for $4 each and resells them for $10.95 each.The firm sells 6,200 plants per year.Generally, the firm orders 250 plants at a time and has a fixed cost per order of $49.The carrying cost per unit is $22.32.To avoid newer plants mixing with older plants, the inventory is totally sold out before it is restocked.Given the current ordering system, the total annual carrying cost is ____ and the total annual restocking cost is ____.

On May 12, you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10, net 20.The discounted amount due is _____ which is payable no later than ____.May has 31 days.

During a normal month, Hank's receives a total of nine checks with a total value of $148,500.On average, it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Which of these is most likely the fastest method of collecting cash?

Larry Imports writes three checks a day for an average amount of $11,500 each.These checks generally clear the bank 2.1 days after they are written.In addition, the firm generally receives and deposits checks amounting to $19,500 each day.All deposits are available the next day.What is the firm's net float?

As of Monday morning, the ledger balance and the available balance for a firm was $3,000.During the day, the firm wrote three checks in the amounts of $750, $225, and $452.The firm deposited a check for $560 and a check for $258.What is the amount of the collection float as of the end of the day assuming none of these checks have cleared?

The Check Clearing Act for the 21^st Century has caused:

Harvest Foods generally receives three checks a month in the amounts of $38,950, $16,750, and $63,800.It takes an average of one day for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float? Assume a 30-day month.

Which one of the following will reduce the disbursement float of a firm?