Question 1

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 D)

Question 2

Which one of the following is directly related to increases in a firm's current assets?

Accepted Answer

A)  Reorder costs
B)  Shortage costs
C)  Restocking costs
D)  Out-of-stock events
E)  Carrying costsF) C) and D)
G) A) and B)

Question 3

A firm has the following account balances.Which one of the following statements is correct concerning those balances?

Accepted Answer

A)  Accounts receivable is a $900 source of cash.
B)  Common stock is a $1,500 source of cash.
C)  Net working capital, excluding cash, is a $1,500 use of cash.
D)  Long-term debt is a $5,800 source of cash.
E)  Total debt is a $6,100 use of cash.F) B) and E)
G) A) and E)

Question 4

Which one of the following industries is most apt to have the shortest operating cycle?

Accepted Answer

A)  Toy store
B)  Car manufacturer
C)  Local restaurant
D)  Furniture store
E)  Plastics manufacturerF) All of the above
G) C) and E)

Question 5

Wage Garnishers,Inc.has sales for the year of $50,300 and cost of goods sold of $23,700.The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400.What is the inventory period?

Accepted Answer

A)  12.39 days
B)  18.68 days
C)  31.29 days
D)  73.92 days
E)  81.36 daysF) A) and D)
G) B) and D)

Question 6

Carter's Gym currently has a 189-day operating cycle.The company is concentrating on increasing its inventory turnover rate from 8.4 to 9.5 times.What will the firm's new operating cycle be if it can effectively make this change?

Accepted Answer

A)  183.97 days
B)  183.46 days
C)  187.00 days
D)  194.03 days
E)  196.34 daysF) C) and D)
G) D) and E)

Question 7

The following is the sales budget for Uptown Rentals,Inc.for the first quarter of 2013:  Credit sales are collected as follows:
60 percent in the month of sale
32 percent in the month after the sale
8 percent in the second month after the sale
The accounts receivable balance at the end of the previous quarter was $87,040 ($73,600 of which was uncollected December sales) .How much did the firm collect in the month of February?

Accepted Answer

A)  $118,533
B)  $121,212
C)  $135,208
D)  $138,615
E)  $147,040F) A) and B)
G) B) and D)

Question 8

The local video store has to restock a popular video game every five days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Accepted Answer

A)  5.00 times
B)  5.25 times
C)  57.14 times
D)  60.00 times
E)  73.00 timesF) A) and B)
G) C) and D)

Question 9

Harter's Meats has an average collection period of 36 days and factors all of its receivables immediately at a 1.2 percent discount.Assume all accounts are collected in full.What is the firm's effective cost of borrowing?

Accepted Answer

A)  12.88 percent
B)  12.94 percent
C)  12.97 percent
D)  13.02 percent
E)  13.07 percentF) None of the above
G) C) and D)

Question 10

Which one of the following statements is correct?

Accepted Answer

A)  If a firm decreases its inventory period, its accounts receivable period will also decrease.
B)  The longer the cash cycle, the more cash a firm typically has available to invest.
C)  A firm would prefer a negative cash cycle over a positive cash cycle.
D)  Decreasing the inventory period will also decrease the payables period.
E)  Both the operating cycle and the cash cycle must be positive values.F) All of the above
G) A) and B)

Question 11

The cash cycle is equal to which one of the following?

Accepted Answer

A)  Inventory period minus the accounts payable period
B)  Operating cycle plus the accounts payable period
C)  Operating cycle minus the accounts receivable period
D)  Accounts receivable period minus the accounts payable period plus the inventory period
E)  Inventory period minus the accounts receivable period minus the accounts payable periodF) None of the above
G) C) and E)

Question 12

All else constant,which one of the following will 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) A) and D)
G) C) and D)

Question 13

Black Water Mills is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Accepted Answer

A)  Carrying costs exceed shortage costs
B)  Carrying costs are equal to zero
C)  Both carrying costs and shortage costs are at their minimum levels
D)  Shortage costs are equal to zero
E)  Shortage costs equal carrying costsF) A) and D)
G) D) and E)

Question 14

The Three Stooges has the following estimated sales.  Purchases are equal to 75 percent of the following quarter's sales.The accounts payable period is 45 days.Assume each month has 30 days.What is the estimated accounts payable balance at the end of quarter 2?

Accepted Answer

A)  $6,300
B)  $6,520
C)  $6,624
D)  $4,901
E)  $4,200F) D) and E)
G) B) and C)

Question 15

Which one of the following 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 rateF) A) and C)
G) A) and E)

Question 16

You've worked out a line of credit arrangement that allows you to borrow up to $55 million at any time.The interest rate is 0.55 percent per month.In addition,3 percent of the amount you borrow must be deposited in a non-interest-bearing account.Assume that your bank uses compound interest on its line-of-credit loans.Suppose you need $12 million today and you repay it in six months.How much interest will you pay?

Accepted Answer

A)  $387,567
B)  $413,902
C)  $421,028
D)  $441,414
E)  $442,886F) B) and E)
G) C) and E)

Question 17

Western Feed Mills has projected the following quarterly sales amounts for the coming year.  Accounts receivable at the beginning of the year are $325.Western Feed Mills has a 60-day collection period.How much cash will the firm collect in quarter 1 and quarter 2,respectively?

Accepted Answer

A)  $325; $498
B)  $498; $347
C)  $498; $530
D)  $672; $367
E)  $672; $540F) B) and C)
G) A) and E)

Question 18

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

Accepted Answer

A)  The accounts payable period is equal to 365/(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) All of the above
G) A) and B)

Question 19

Which one of the following is most apt to decrease the accounts receivable period?

Accepted Answer

A)  Increasing the time granted to customers to pay for purchases
B)  Shortening the cash cycle
C)  Increasing the discount for cash payment
D)  Selling inventory slower
E)  Paying suppliers fasterF) C) and E)
G) None of the above

Question 20

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) A) and E)
G) B) and E)

Exam 16: Short-Term Financial Planning

All else constant,which one of the following will decrease the cash cycle?

Correct Answer
verified

The local video store has to restock a popular video game every five days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Correct Answer
verified

The cash cycle is equal to which one of the following?

Correct Answer
verified

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

Correct Answer
verified

The Three Stooges has the following estimated sales. Purchases are equal to 75 percent of the following quarter's sales.The accounts payable period is 45 days.Assume each month has 30 days.What is the estimated accounts payable balance at the end of quarter 2?

Correct Answer
verified

Which one of the following will increase the operating cycle?

Correct Answer
verified

Western Feed Mills has projected the following quarterly sales amounts for the coming year. Accounts receivable at the beginning of the year are $325.Western Feed Mills has a 60-day collection period.How much cash will the firm collect in quarter 1 and quarter 2,respectively?

Correct Answer
verified

Which one of the following statements is correct?

Correct Answer
verified

Black Water Mills is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Correct Answer
verified

Wage Garnishers,Inc.has sales for the year of $50,300 and cost of goods sold of $23,700.The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400.What is the inventory period?

Correct Answer
verified

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

Correct Answer
verified

Which one of the following is directly related to increases in a firm's current assets?

Correct Answer
verified

Correct Answer
verified

A firm has the following account balances.Which one of the following statements is correct concerning those balances?

Correct Answer
verified

Harter's Meats has an average collection period of 36 days and factors all of its receivables immediately at a 1.2 percent discount.Assume all accounts are collected in full.What is the firm's effective cost of borrowing?

Correct Answer
verified

Which one of the following industries is most apt to have the shortest operating cycle?

Correct Answer
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Correct Answer
verified

Carter's Gym currently has a 189-day operating cycle.The company is concentrating on increasing its inventory turnover rate from 8.4 to 9.5 times.What will the firm's new operating cycle be if it can effectively make this change?

Correct Answer
verified

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

Correct Answer
verified

Which one of the following is most apt to decrease the accounts receivable period?

Correct Answer
verified

Exam 16: Short-Term Financial Planning

All else constant,which one of the following will decrease the cash cycle?

Correct AnswerverifiedShow Answer

The local video store has to restock a popular video game every five days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Correct AnswerverifiedShow Answer

The cash cycle is equal to which one of the following?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Three Stooges has the following estimated sales. Purchases are equal to 75 percent of the following quarter's sales.The accounts payable period is 45 days.Assume each month has 30 days.What is the estimated accounts payable balance at the end of quarter 2?

Correct AnswerverifiedShow Answer

Which one of the following will increase the operating cycle?

Correct AnswerverifiedShow Answer

Western Feed Mills has projected the following quarterly sales amounts for the coming year. Accounts receivable at the beginning of the year are $325.Western Feed Mills has a 60-day collection period.How much cash will the firm collect in quarter 1 and quarter 2,respectively?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Black Water Mills is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Correct AnswerverifiedShow Answer

Wage Garnishers,Inc.has sales for the year of $50,300 and cost of goods sold of $23,700.The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400.What is the inventory period?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following is directly related to increases in a firm's current assets?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm has the following account balances.Which one of the following statements is correct concerning those balances?

Correct AnswerverifiedShow Answer

Harter's Meats has an average collection period of 36 days and factors all of its receivables immediately at a 1.2 percent discount.Assume all accounts are collected in full.What is the firm's effective cost of borrowing?

Correct AnswerverifiedShow Answer

Which one of the following industries is most apt to have the shortest operating cycle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Carter's Gym currently has a 189-day operating cycle.The company is concentrating on increasing its inventory turnover rate from 8.4 to 9.5 times.What will the firm's new operating cycle be if it can effectively make this change?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following is most apt to decrease the accounts receivable period?

Correct AnswerverifiedShow Answer

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

Correct Answer
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Correct Answer
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