Question 1

Provide a deﬁnition for the term operating cycle.

Accepted Answer

The time period betw...

Question 2

Restrictive short-term ﬁnancial policies regarding current asset management include three basic
actions. List and brieﬂy describe each action.

Accepted Answer

The three actions are: Keep ca...

Question 3

Webster, Inc. has sales of $267,000, costs of goods sold of $149,000, and average accounts receivable of $18,400. On average, how long does it take its credit customers to pay for their
Purchases?

Accepted Answer

A)   8.10 days
B)   14.51 days
C)   25.15 days
D)   38.81 days
E)   45.07 daysF) B) and D)
G) C) and E)

Question 4

A decrease in accounts payable is a source of cash.

Accepted Answer

A) True 
 B)False

Question 5

Randy's Meat Market has a 46-day collection period. The amount of cash that Randy collects each quarter is equal to:

Accepted Answer

A)   46% of last quarter sales plus 54% of this quarter sales.
B)   46 days of sales from last quarter plus 54 days of sales from this quarter.
C)   44 days of sales from last quarter plus 46 days of sales from this quarter.
D)   51% of last quarter sales plus 49% of this quarter sales.
E)   54% of last quarter sales plus 46% of this quarter sales.F) A) and D)
G) A) and E)

Question 6

Suppose that the inventory period is 50 days, the accounts receivable period is 40 days, and the cash cycle is 55 days. What is the accounts payable period?

Accepted Answer

A)   35 days
B)   45 days
C)   55 days
D)   90 days
E)   135 daysF) All of the above
G) D) and E)

Question 7

A short-term loan where the lender holds the borrower's receivables as security is called:

Accepted Answer

A)   A banker's acceptance.
B)   Accounts receivable ﬁnancing.
C)   A letter of credit.
D)   Factored receivables ﬁnancing.
E)   A bond.F) A) and D)
G) B) and E)

Question 8

Accepting credit from a supplier increases cash.

Accepted Answer

A) True 
 B)False

Question 9

Liberal credit terms for customers is associated with a restrictive short-term ﬁnancial policy.

Accepted Answer

A) True 
 B)False

Question 10

Delta Motors has sales of $521,000. The cost of goods sold is equal to 63% of sales. The ﬁrm has an average inventory of $22,800. How many days on average does it take the ﬁrm to sell its
Inventory?

Accepted Answer

A)   15.97 days
B)   16.08 days
C)   17.47 days
D)   25.35 days
E)   26.14 daysF) B) and E)
G) B) and C)

Question 11

ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The ﬁrm is now changing its policy and only producing a product when it
Receives an actual order from a customer. All else equal, this change will:

Accepted Answer

A)   Increase the operating cycle.
B)   Lengthen the accounts receivable period.
C)   Shorten the accounts payable period.
D)   Decrease the cash cycle.
E)   Decrease the inventory turnover rate.F) A) and E)
G) B) and E)

Question 12

Flexible short-term ﬁnancial policies tend to:

Accepted Answer

A)   Maintain low accounts receivable balances.
B)   Support few investments in marketable securities.
C)   Minimize the investment in inventory.
D)   Maintain large cash balances.
E)   Tightly restrict credit sales.F) A) and C)
G) B) and E)

Question 13

For cash budgeting purposes, capital equipment purchases are generally considered as paid in the
quarter incurred

Accepted Answer

A) True 
 B)False

Question 14

A manufacturing ﬁrm has a 90 day collection period. The ﬁrm produces seasonal merchandise and thus has the least sales during the ﬁrst quarter of a year and the highest level of sales during the
Third quarter of a year. The ﬁrm maintains a relatively steady level of production which means that
Its cash disbursements are fairly equal in all quarters. The ﬁrm is most apt to face a cash-out
Situation in:

Accepted Answer

A)   The ﬁrst quarter.
B)   The second quarter.
C)   The third quarter.
D)   The fourth quarter.
E)   Any quarter, equally.F) B) and D)
G) C) and D)

Question 15

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable
From the ﬁrm at a 2% discount. What was the ﬁrm's days in receivables?

Accepted Answer

A)   61 days
B)   65 days
C)   67 days
D)   71 days
E)   74 daysF) A) and B)
G) B) and D)

Question 16

Which of the following statements is true?

Accepted Answer

A)   The inventory period of the operating cycle ends when the receivable it creates is actually paid for by the customer.
B)   The length of the operating cycle is always greater than or equal to the length of the cash cycle.
C)   The accounts receivable period is always greater than or equal to the length of the cash cycle.
D)   The inventory period plus the accounts receivable period is equal in length to the operating cycle plus the cash cycle.
E)   The accounts payable period ends when the inventory is sold.F) All of the above
G) A) and C)

Question 17

Provide a deﬁnition for the term shortage costs.

Accepted Answer

Costs that fall with...

Question 18

A restrictive short-term ﬁnancial policy, as compared to a more ﬂexible policy, tends to increase the
sales of a ﬁrm due to the ﬁrm's credit availability and terms.

Accepted Answer

A) True 
 B)False

Question 19

Long-term debt reduction represents an increase in cash.

Accepted Answer

A) True 
 B)False

Question 20

A ﬂexible short-term ﬁnancial policy:

Accepted Answer

A)   Is associated with ﬁrms where the carrying costs are considered to be less than the shortage costs.
B)   Applies mostly to ﬁrms where the shortage costs tend to be less than the carrying costs.
C)   Applies only to ﬁrms that strictly limit their credit sales.
D)   Tends to decrease the amount of current assets held by a ﬁrm.
E)   Is designed to utilize short-term external ﬁnancing to fund all of the seasonal increases in current assets.F) C) and D)
G) A) and C)

Exam 18: Short-Term Finance and Planning

Correct Answer
verified

For cash budgeting purposes, capital equipment purchases are generally considered as paid in the quarter incurred

Correct Answer
verified

Provide a deﬁnition for the term shortage costs.

Correct Answer
verified
Costs that fall with...
View Answer

Webster, Inc. has sales of $267,000, costs of goods sold of $149,000, and average accounts receivable of $18,400. On average, how long does it take its credit customers to pay for their Purchases?

Correct Answer
verified

A ﬂexible short-term ﬁnancial policy:

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Delta Motors has sales of $521,000. The cost of goods sold is equal to 63% of sales. The ﬁrm has an average inventory of $22,800. How many days on average does it take the ﬁrm to sell its Inventory?

Correct Answer
verified

Restrictive short-term ﬁnancial policies regarding current asset management include three basic actions. List and brieﬂy describe each action.

Correct Answer
verified
The three actions are: Keep ca...
View Answer

Flexible short-term ﬁnancial policies tend to:

Correct Answer
verified

Liberal credit terms for customers is associated with a restrictive short-term ﬁnancial policy.

Correct Answer
verified

Long-term debt reduction represents an increase in cash.

Correct Answer
verified

Suppose that the inventory period is 50 days, the accounts receivable period is 40 days, and the cash cycle is 55 days. What is the accounts payable period?

Correct Answer
verified

A restrictive short-term ﬁnancial policy, as compared to a more ﬂexible policy, tends to increase the sales of a ﬁrm due to the ﬁrm's credit availability and terms.

Correct Answer
verified

Accepting credit from a supplier increases cash.

Correct Answer
verified

A decrease in accounts payable is a source of cash.

Correct Answer
verified

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable From the ﬁrm at a 2% discount. What was the ﬁrm's days in receivables?

Correct Answer
verified

A short-term loan where the lender holds the borrower's receivables as security is called:

Correct Answer
verified

Randy's Meat Market has a 46-day collection period. The amount of cash that Randy collects each quarter is equal to:

Correct Answer
verified

ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The ﬁrm is now changing its policy and only producing a product when it Receives an actual order from a customer. All else equal, this change will:

Correct Answer
verified

Provide a deﬁnition for the term operating cycle.

Correct Answer
verified
The time period betw...
View Answer

Exam 18: Short-Term Finance and Planning

Correct AnswerverifiedShow Answer

For cash budgeting purposes, capital equipment purchases are generally considered as paid in the quarter incurred

Correct AnswerverifiedShow Answer

Provide a deﬁnition for the term shortage costs.

Correct AnswerverifiedCosts that fall with...View AnswerShow Answer

Webster, Inc. has sales of $267,000, costs of goods sold of $149,000, and average accounts receivable of $18,400. On average, how long does it take its credit customers to pay for their Purchases?

Correct AnswerverifiedShow Answer

A ﬂexible short-term ﬁnancial policy:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Delta Motors has sales of $521,000. The cost of goods sold is equal to 63% of sales. The ﬁrm has an average inventory of $22,800. How many days on average does it take the ﬁrm to sell its Inventory?

Correct AnswerverifiedShow Answer

Restrictive short-term ﬁnancial policies regarding current asset management include three basic actions. List and brieﬂy describe each action.

Correct AnswerverifiedThe three actions are: Keep ca...View AnswerShow Answer

Flexible short-term ﬁnancial policies tend to:

Correct AnswerverifiedShow Answer

Liberal credit terms for customers is associated with a restrictive short-term ﬁnancial policy.

Correct AnswerverifiedShow Answer

Long-term debt reduction represents an increase in cash.

Correct AnswerverifiedShow Answer

Suppose that the inventory period is 50 days, the accounts receivable period is 40 days, and the cash cycle is 55 days. What is the accounts payable period?

Correct AnswerverifiedShow Answer

A restrictive short-term ﬁnancial policy, as compared to a more ﬂexible policy, tends to increase the sales of a ﬁrm due to the ﬁrm's credit availability and terms.

Correct AnswerverifiedShow Answer

Accepting credit from a supplier increases cash.

Correct AnswerverifiedShow Answer

A decrease in accounts payable is a source of cash.

Correct AnswerverifiedShow Answer

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable From the ﬁrm at a 2% discount. What was the ﬁrm's days in receivables?

Correct AnswerverifiedShow Answer

A short-term loan where the lender holds the borrower's receivables as security is called:

Correct AnswerverifiedShow Answer

Randy's Meat Market has a 46-day collection period. The amount of cash that Randy collects each quarter is equal to:

Correct AnswerverifiedShow Answer

ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The ﬁrm is now changing its policy and only producing a product when it Receives an actual order from a customer. All else equal, this change will:

Correct AnswerverifiedShow Answer

Provide a deﬁnition for the term operating cycle.

Correct AnswerverifiedThe time period betw...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Costs that fall with...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The three actions are: Keep ca...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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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The time period betw...
View Answer