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Exam 16: Short-Term Financial Planning

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Question 61

Multiple Choice

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Bee's Honey currently has an inventory turnover of 28.6, a payables turnover of 10.8, and a receivables turnover of 14.4.How many days are in the cash cycle?

A) 4.31 days
B) 2.70 days
C) 16.51 days
D) 24.39 days
E) 32.20 days

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

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Question 62

Multiple Choice

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Big Red's purchases from suppliers in a quarter are equal to 71 percent of the next quarter's forecast sales.The payables period is 60 days; other expenses are paid when incurred Wages, taxes, and other expenses are 24 percent of sales, and interest and dividends are $40 per quarter.No capital expenditures are planned.Projected quarterly sales, starting with Q1, are $1,520, $1,580, $1,630, and $1,590, respectively.Sales for the first quarter of the following year are projected at $1,540.What is the amount of the total disbursements for Q2?

A) $1,564
B) $1,520
C) $1,601
D) $1,538
E) $1,553

F) B) and C)
G) C) and E)

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Question 63

Multiple Choice

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Accounts receivable financing is the term used to describe which one of the following types of loans that involve either the assignment or the factoring of a firm's accounts receivable?

NuParts, Inc., has estimated quarterly sales for next year, starting with Quarter 1, of $15,900, $16,800, $17,500, and $16,400.Purchases are equal to 67 percent of the following quarter's sales and the accounts payable period is 60 days.Assume 30 days in each month.How much will the firm owe its suppliers at the end of Quarter 3?

Organic Foods Mart increased its operating cycle from 63 days to 68 days while the cash cycle decreased by 2 days.How have these changes affected the accounts payable period?

DA West has annual sales of $2.8 million.The cost of goods sold is equal to 71 percent of sales.The average accounts receivable balance is $227,470 and the average accounts payable balance is $236,595.How many days on average does it take the firm to pay its suppliers?

AC Sales has estimated quarterly sales for next year, starting with Quarter 1, of $16,200, $17,300, $18,700, and $20,400.If purchases are equal to 72 percent of the following quarter's sales, what is the estimated amount of purchases for Quarter 2?

The Shoe Tree currently has an operating cycle of 199 days and a cash cycle of 54 days.The company is implementing some changes that will reduce the inventory period by 11 days, decrease the receivables period by 6 days, and decrease the accounts payable period by 4 days.How many days will be in the new cash cycle once all of these changes become effective?

Which of the following costs will tend to increase if a firm switches to a restrictive short-term financial policy from a flexible short-term policy? I.Lost sales due to out-of-stock items II.Inventory warehousing costs III.Cash-outs IV.Total annual order costs

Industrial Supply has projected Q1 sales at $38,200, Q2 sales at $44,900, and Q3 sales at $42,300.Purchasesequal69 percent of the next quarter's sales.The accounts receivable period is 30 days and the accounts payable period is 60 days.At the beginning of Q1, the firm has an accounts receivable balance of $11,800 and an accounts payable balance of $23,300.The firm pays $1,600 a month in cash expenses and $800 a month in interest and taxes.At the beginning of the Q1, the cash balance is $500 and the short-term loan balance is zero.During Q1, capital spending will be $2,100.The firm maintains a minimum cash balance of $200.Assume each month has 30 days.What is the cumulative cash surplus (deficit) at the end of Q1, prior to any short-term borrowing?

A firm has an average collection period of 37 days and factors all of its receivables immediately at a discount of .98 percent.Assume all accounts are collected in full.What is the firm's effective cost of borrowing?

The amount of time a firm holds inventory in stock is referred to as the:

Gerald Promotions has a receivables turnover rate of 21.4 a payables turnover rate of 15 and an inventory turnover rate of 27.4.What is the length of the firm's operating cycle?