Question 1

All else held constant, which of these statements is correct concerning the accounts payable period?

Accepted Answer

A)  The accounts payable period is equal to 360/(Sales/Average accounts payable) .
B)  A decrease in the accounts payable period will increase the operating cycle.
C)  An increase in the accounts payable period will decrease the cash cycle.
D)  A decrease in the accounts payable period will decrease the operating cycle.
E)  An increase in the accounts payable turnover rate decreases the cash cycle.F) A) and B)
G) C) and D)

Question 2

The Brown Squirrel has estimated sales for January through May of $14,700, $16,900, $23,500, $36,700, and $42,300, respectively.Assume there are 30 days in each month and the accounts receivable period is 45 days.How much should the firm expect to collect in May?

Accepted Answer

A)  $36,700
B)  $20,200
C)  $30,100
D)  $28,450
E)  $39,500F) A) and C)
G) D) and E)

Question 3

Suppose MMP changes its policy and starts requiring all of its customers to pay within 20 days rather than the 30 days that it currently allows.Which one of the following will result from this change?

Accepted Answer

A)  Increase in receivables period
B)  Increase in inventory period
C)  Decrease in cash cycle
D)  Increase in operating cycle
E)  Increase in accounts payable periodF) C) and E)
G) D) and E)

Question 4

The HOT Truck operates several specialty vehicles that provide hot food and beverages for firms that have workers employed in outlying regions.The company has annual sales of $489,500.Cost of goods sold average 59 percent of sales and the profit margin is 6.1 percent.The average accounts receivable balance is $41,700.On average, how long does it take this food truck to collect payment for its services?

Accepted Answer

A)  27.84 days
B)  28.17 days
C)  31.09 days
D)  38.33 days
E)  41.90 daysF) B) and E)
G) B) and D)

Question 5

Furniture Outlet has an accounts receivable period of 63 days and an accounts payable period of 87 days.The company turns over its inventory 4.3 times per year and marks up the inventory an average of 38 percent over its wholesale cost.What is the length of the firm's operating cycle?

Accepted Answer

A)  125.36 days
B)  147.88 days
C)  89.22 days
D)  60.88 days
E)  125.68 daysF) A) and C)
G) A) and B)

Question 6

The accounts receivable period is the time that elapses between the _____ and the ____.

Accepted Answer

A)  purchase of inventory; payment to the supplier
B)  purchase of inventory; collection of the receivable
C)  sale of inventory; payment to supplier
D)  sale of inventory; collection of the receivable
E)  sale of inventory; billing to customerF) B) and D)
G) A) and D)

Question 7

Which type of financing is generally used by new car dealers to finance their inventories?

Accepted Answer

A)  Blanket inventory lien arrangement
B)  Trust receipt loans
C)  Committed line of credit
D)  Trade credit financing
E)  Field warehousing financingF) B) and D)
G) A) and B)

Question 8

Which firm is most apt to have the shortest inventory period?

Accepted Answer

A)  General merchandise retail store
B)  Hardware store
C)  Furniture store
D)  Locomotive manufacturer
E)  DelicatessenF) B) and C)
G) A) and D)

Question 9

A company has expected sales for January through April of $9,800, $9,500, $13,800, and $9,500, respectively.Assume each month has 30 days and the accounts receivable period is 38 days.How much does the company expect to collect in the month of May?

Accepted Answer

A)  $10,646.67
B)  $15,880.00
C)  $9,720.00
D)  $12,213.33
E)  $15,406.00F) A) and E)
G) None of the above

Question 10

Metropolitan Realty currently has 54 days in its cash cycle and 98 days in its operating cycle.The firm purchases its entire inventory from one supplier.This supplier has offered a 2.5 percent discount on all purchases if Metropolitan will pay in 7 days.If the market opts to take advantage of the discount offered, its new operating cycle will be _____ days and its new cash cycle will be _____ days.

Accepted Answer

A)  98; 105
B)  88; 81
C)  98; 81
D)  98; 91
E)  95;81F) B) and C)
G) C) and D)

Question 11

Diva Donuts purchases are equal to 79 percent of the following month's sales.The accounts payable period for purchases is 30 days while all other expenditures are paid in the month in which they are incurred.Assume each month has 30 days.The company has compiled the following information.  What is the total amount of the firm's disbursements for the month of June?

Accepted Answer

A)  $10,500
B)  $ 8,795
C)  $10,795
D)  $13,500
E)  $11,190F) A) and D)
G) A) and B)

Question 12

Northern Beef has estimated quarterly sales for the coming year, starting with Quarter 1, of $680, $725, $740, and $720, respectively.The accounts receivable balance at the beginning of Q1 is $330 and the collection period is 60 days.How much cash will the firm collect in Q1, Q2, and Q3, respectively?

Accepted Answer

A)  $695.00; $498.03; $730.00
B)  $695.00; $466.67; $626.67
C)  $556.67; $695.00; $730.00
D)  $556.67; $367.33; $626.67
E)  $647.33; $626.67; $730.00F) C) and D)
G) B) and E)

Question 13

A committed line of credit:

Accepted Answer

A)  guarantees that a set amount of funds will be available to a firm for a stated period of time regardless of events that might occur during that time period.
B)  is a guarantee that a bank will purchase a firm's accounts receivable at full value.
C)  provides greater assurance than a noncommitted credit line that funds will be available when needed by a firm.
D)  guarantees that any funds borrowed during a stated period of time will be charged the lowest rate of interest the lending bank offers to any of its customers.
E)  is a loan arrangement for a stated period of time which is free of all costs and fees other than the actual interest paid on the funds borrowed.F) None of the above
G) A) and B)

Question 14

Fido's Markets has a cash cycle of 24 days, an operating cycle of 39 days, and an inventory period of 2.3 days.The company reported cost of goods sold in the amount of $465,250, and credit sales were $600,000.What is the company's average balance in accounts payable?

Accepted Answer

A)  $19,120
B)  $18,414
C)  $20,203
D)  $22,344
E)  $23,515F) A) and D)
G) C) and E)

Question 15

Which statement is correct?

Accepted Answer

A)  Firms should generally finance all of their assets with long-term debt.
B)  Firms that follow restrictive financial policies can generally avoid short-term debt financing.
C)  Short-term borrowing is generally more expensive than long-term borrowing.
D)  Long-term interest rates tend to be more volatile than short-term rates.
E)  A firm is less apt to face financial distress if it adopts a flexible financial policy rather than a restrictive policy.F) A) and E)
G) C) and D)

Question 16

Which of these is most apt to decrease the cash cycle?

Accepted Answer

A)  Decreasing the credit period granted to a customer
B)  Decreasing the inventory turnover rate
C)  Decreasing the accounts payable period
D)  Decreasing the accounts receivable turnover rate
E)  Increasing the receivables periodF) C) and D)
G) C) and E)

Question 17

By definition, an inventory loan is which one of the following types of loan?

Accepted Answer

A)  Secured short-term loan
B)  Unsecured short-term loan
C)  Secured long-term loan
D)  Unsecured long-term loan
E)  Trust receipt loanF) A) and B)
G) C) and D)

Question 18

The Corner Store is a small-sized, general store that stocks a minimal level of basic supplies and offers gasoline to a rural community.Which type of credit is probably best-suited for financing this store's inventory?

Accepted Answer

A)  Trust receipt financing
B)  Receivables factoring
C)  Field warehousing
D)  Blanket inventory lien
E)  Receivables assignmentF) A) and B)
G) D) and E)

Question 19

Second Chance Gaming has to restock a popular electronic game every 2.5 days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Accepted Answer

A)  115 times
B)  105 times
C)  99 times
D)  118 times
E)  146 timesF) A) and B)
G) All of the above

Question 20

Which one of the following actions will decrease the operating cycle?

Accepted Answer

A)  Increasing inventory
B)  Paying suppliers faster
C)  Paying for more inventory with cash rather than credit
D)  Granting customers more time to pay for their credit purchases
E)  Lessening the production time needed to manufacture a good for saleF) None of the above
G) All of the above

Exam 16: Short-Term Financial Planning

Correct Answer
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Correct Answer
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Which one of the following actions will decrease the operating cycle?

Correct Answer
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Which of these is most apt to decrease the cash cycle?

Correct Answer
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Furniture Outlet has an accounts receivable period of 63 days and an accounts payable period of 87 days.The company turns over its inventory 4.3 times per year and marks up the inventory an average of 38 percent over its wholesale cost.What is the length of the firm's operating cycle?

Correct Answer
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All else held constant, which of these statements is correct concerning the accounts payable period?

Correct Answer
verified

By definition, an inventory loan is which one of the following types of loan?

Correct Answer
verified

Correct Answer
verified

Which type of financing is generally used by new car dealers to finance their inventories?

Correct Answer
verified

The Corner Store is a small-sized, general store that stocks a minimal level of basic supplies and offers gasoline to a rural community.Which type of credit is probably best-suited for financing this store's inventory?

Correct Answer
verified

Which firm is most apt to have the shortest inventory period?

Correct Answer
verified

Which statement is correct?

Correct Answer
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Correct Answer
verified

Second Chance Gaming has to restock a popular electronic game every 2.5 days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Correct Answer
verified

Fido's Markets has a cash cycle of 24 days, an operating cycle of 39 days, and an inventory period of 2.3 days.The company reported cost of goods sold in the amount of $465,250, and credit sales were $600,000.What is the company's average balance in accounts payable?

Correct Answer
verified

A committed line of credit:

Correct Answer
verified

Suppose MMP changes its policy and starts requiring all of its customers to pay within 20 days rather than the 30 days that it currently allows.Which one of the following will result from this change?

Correct Answer
verified

A company has expected sales for January through April of $9,800, $9,500, $13,800, and $9,500, respectively.Assume each month has 30 days and the accounts receivable period is 38 days.How much does the company expect to collect in the month of May?

Correct Answer
verified

The Brown Squirrel has estimated sales for January through May of $14,700, $16,900, $23,500, $36,700, and $42,300, respectively.Assume there are 30 days in each month and the accounts receivable period is 45 days.How much should the firm expect to collect in May?

Correct Answer
verified

The accounts receivable period is the time that elapses between the _ and the .

Correct Answer
verified

Exam 16: Short-Term Financial Planning

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following actions will decrease the operating cycle?

Correct AnswerverifiedShow Answer

Which of these is most apt to decrease the cash cycle?

Correct AnswerverifiedShow Answer

Furniture Outlet has an accounts receivable period of 63 days and an accounts payable period of 87 days.The company turns over its inventory 4.3 times per year and marks up the inventory an average of 38 percent over its wholesale cost.What is the length of the firm's operating cycle?

Correct AnswerverifiedShow Answer

All else held constant, which of these statements is correct concerning the accounts payable period?

Correct AnswerverifiedShow Answer

By definition, an inventory loan is which one of the following types of loan?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which type of financing is generally used by new car dealers to finance their inventories?

Correct AnswerverifiedShow Answer

The Corner Store is a small-sized, general store that stocks a minimal level of basic supplies and offers gasoline to a rural community.Which type of credit is probably best-suited for financing this store's inventory?

Correct AnswerverifiedShow Answer

Which firm is most apt to have the shortest inventory period?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Second Chance Gaming has to restock a popular electronic game every 2.5 days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Correct AnswerverifiedShow Answer

Fido's Markets has a cash cycle of 24 days, an operating cycle of 39 days, and an inventory period of 2.3 days.The company reported cost of goods sold in the amount of $465,250, and credit sales were $600,000.What is the company's average balance in accounts payable?

Correct AnswerverifiedShow Answer

A committed line of credit:

Correct AnswerverifiedShow Answer

Suppose MMP changes its policy and starts requiring all of its customers to pay within 20 days rather than the 30 days that it currently allows.Which one of the following will result from this change?

Correct AnswerverifiedShow Answer

A company has expected sales for January through April of $9,800, $9,500, $13,800, and $9,500, respectively.Assume each month has 30 days and the accounts receivable period is 38 days.How much does the company expect to collect in the month of May?

Correct AnswerverifiedShow Answer

The Brown Squirrel has estimated sales for January through May of $14,700, $16,900, $23,500, $36,700, and $42,300, respectively.Assume there are 30 days in each month and the accounts receivable period is 45 days.How much should the firm expect to collect in May?

Correct AnswerverifiedShow Answer

The accounts receivable period is the time that elapses between the _____ and the ____.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

The accounts receivable period is the time that elapses between the _ and the .

Correct Answer
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