Question 1

Which of the following tend to rise when a firm switches to a flexible financial policy from a restrictive financial policy?
I.Restocking costs
II.Price reductions to offset limited selection
III.Storage costs
IV.Current asset opportunity costs

Accepted Answer

A)  I and II only
B)  III and IV only
C)  I, III, and IV only
D)  I, II, and III only
E)  II, III, and IV onlyF) A) and B)
G) C) and D)

Question 2

Wholesome Foods has a cash cycle of 21 days,an operating cycle of 46 days,and an inventory period of 1.5 days.The company reported cost of goods sold in the amount of $320,000,and credit sales were $410,000.What is the company's average balance in accounts payable?

Accepted Answer

A)  $21,918
B)  $18,414
C)  $20,203
D)  $22,344
E)  $23,515F) A) and E)
G) A) and C)

Question 3

The Green Pickle has estimated quarterly sales for next year,starting with Quarter I,of $18,600,$21,300,$24,500,and $19,600.The accounts receivable period is 18 days.What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days.

Accepted Answer

A)  $4,333
B)  $4,900
C)  $4,500
D)  $4,667
E)  $4,600F) A) and B)
G) C) and D)

Question 4

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

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, III, and IV only
D)  I, II, and IV only
E)  I, II, III, and IVF) B) and C)
G) A) and D)

Question 5

Which statement related to a cash budget is correct?

Accepted Answer

A)  Capital expenditures are treated as a cash inflow on a cash budget.
B)  The cumulative surplus is computed prior to adjusting for the minimum cash balance.
C)  A positive net cash inflow for a period indicates the cash disbursements exceed the cash collections for the period.
D)  Financially healthy firms can have a negative quarterly net cash inflow.
E)  Firms generally set the minimum cash balance at zero for planning purposes.F) B) and C)
G) A) and E)

Question 6

The Warehouse has projected sales for June through September of $56,700,$68,900,$70,200,and $54,300.The company collects 46 percent of its sales in the month of sale,51 percent in the month following the month of sale,and 2 percent in the second month following the month of sale.The remaining sales are never collected.What is the amount of the August collections?

Accepted Answer

A)  $65,863
B)  $68,565
C)  $62,158
D)  $67,288
E)  $65,516F) B) and D)
G) B) and C)

Question 7

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?

Accepted Answer

A)  $12,960
B)  $14,688
C)  $12,456
D)  $13,464
E)  $13,720F) A) and B)
G) B) and C)

Question 8

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) B) and E)
G) B) and D)

Question 9

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) A) and B)
G) B) and D)

Question 10

Palm Beach Yachts has a line of credit with a local bank that permits it to borrow up to $1.8 million at any time.The interest rate is .78 percent per month.The bank charges compound interest and also requires that 5 percent of the amount borrowed be deposited into a non-interest-bearing account.What is the effective annual interest rate on this loan?

Accepted Answer

A)  10.68 percent
B)  10.43 percent
C)  9.74 percent
D)  10.29 percent
E)  9.91 percentF) A) and D)
G) D) and E)

Question 11

The cash cycle equals the:

Accepted Answer

A)  inventory period plus the accounts receivable period.
B)  inventory period plus the accounts payable period.
C)  operating cycle minus the inventory period.
D)  operating cycle minus the accounts payable period.
E)  operating cycle minus the accounts receivable period.F) B) and C)
G) A) and E)

Question 12

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) None of the above

Question 13

Which of these is most apt to decrease the accounts receivable period for a store that has both cash and credit sales?

Accepted Answer

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

Question 14

The Big Box Store has annual credit sales of $3,268,200 and cost of goods sold of $2,428,600.The average accounts receivable balance is $39,400.How many days on average does it take the firm to collect its accounts receivable?

Accepted Answer

A)  3.97 days
B)  6.30 days
C)  7.27 days
D)  8.13 days
E)  4.40 daysF) A) and B)
G) A) and C)

Question 15

Generally speaking,which of the following situations will occur if a seasonal company adopts a compromise financial policy?
I.Periods where short-term financing is required
II.Less long-term debt than if the firm followed a restrictive financial policy
III.Periods of excess funds which can be invested in short-term marketable securities
IV.Lower investment in fixed assets than if the firm adopted a flexible financial policy

Accepted Answer

A)  I only
B)  II only
C)  I and III only
D)  II and IV only
E)  I, III, and IV onlyF) B) and D)
G) B) and E)

Question 16

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

Accepted Answer

A)  inventory period.
B)  accounts receivable period.
C)  accounts payable period.
D)  operating cycle.
E)  cash cycle.F) A) and C)
G) A) and D)

Question 17

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) A) and E)

Question 18

Which statement is true?

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 automatically decrease the payables period.
E)  Both the operating cycle and the cash cycle must be positive values.F) A) and B)
G) All of the above

Question 19

The accounts receivable turnover rate for Tall Men's Wear has gone from an average of 11.2 times to 13.8 times per year.How has this change affected the firm's accounts receivable period?

Accepted Answer

A)  Decrease of 3.98 days
B)  Decrease of 6.14 days
C)  Decrease of 2.28 days
D)  Increase of 2.28 days
E)  Increase of 6.14 daysF) A) and D)
G) B) and D)

Question 20

Delphino's has sales for the year of $127,300 and cost of goods sold of $86,700.The firm carries an average inventory of $14,300 and has an average accounts payable balance of $13,600.What is the inventory period?

Accepted Answer

A)  89.02 days
B)  58.68 days
C)  31.29 days
D)  60.20 days
E)  81.36 daysF) B) and E)
G) C) and D)

Exam 16: Short-Term Financial Planning

Correct Answer
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Which statement related to a cash budget is correct?

Correct Answer
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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

Delphino's has sales for the year of $127,300 and cost of goods sold of $86,700.The firm carries an average inventory of $14,300 and has an average accounts payable balance of $13,600.What is the inventory period?

Correct Answer
verified

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

Which of these is most apt to decrease the accounts receivable period for a store that has both cash and credit sales?

Correct Answer
verified

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

Correct Answer
verified

The cash cycle equals the:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which statement is true?

Correct Answer
verified

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

Correct Answer
verified

The Green Pickle has estimated quarterly sales for next year,starting with Quarter I,of $18,600,$21,300,$24,500,and $19,600.The accounts receivable period is 18 days.What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days.

Correct Answer
verified

Which of the following tend to rise when a firm switches to a flexible financial policy from a restrictive financial policy? I.Restocking costs II.Price reductions to offset limited selection III.Storage costs IV.Current asset opportunity costs

Correct Answer
verified

The accounts receivable turnover rate for Tall Men's Wear has gone from an average of 11.2 times to 13.8 times per year.How has this change affected the firm's accounts receivable period?

Correct Answer
verified

Wholesome Foods has a cash cycle of 21 days,an operating cycle of 46 days,and an inventory period of 1.5 days.The company reported cost of goods sold in the amount of $320,000,and credit sales were $410,000.What is the company's average balance in accounts payable?

Correct Answer
verified

Correct Answer
verified

The Big Box Store has annual credit sales of $3,268,200 and cost of goods sold of $2,428,600.The average accounts receivable balance is $39,400.How many days on average does it take the firm to collect its accounts receivable?

Correct Answer
verified

Exam 16: Short-Term Financial Planning

Correct AnswerverifiedShow Answer

Which statement related to a cash budget is correct?

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

Delphino's has sales for the year of $127,300 and cost of goods sold of $86,700.The firm carries an average inventory of $14,300 and has an average accounts payable balance of $13,600.What is the inventory period?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of these is most apt to decrease the accounts receivable period for a store that has both cash and credit sales?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The cash cycle equals the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which statement is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Green Pickle has estimated quarterly sales for next year,starting with Quarter I,of $18,600,$21,300,$24,500,and $19,600.The accounts receivable period is 18 days.What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

Which of the following tend to rise when a firm switches to a flexible financial policy from a restrictive financial policy? I.Restocking costs II.Price reductions to offset limited selection III.Storage costs IV.Current asset opportunity costs

Correct AnswerverifiedShow Answer

The accounts receivable turnover rate for Tall Men's Wear has gone from an average of 11.2 times to 13.8 times per year.How has this change affected the firm's accounts receivable period?

Correct AnswerverifiedShow Answer

Wholesome Foods has a cash cycle of 21 days,an operating cycle of 46 days,and an inventory period of 1.5 days.The company reported cost of goods sold in the amount of $320,000,and credit sales were $410,000.What is the company's average balance in accounts payable?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Big Box Store has annual credit sales of $3,268,200 and cost of goods sold of $2,428,600.The average accounts receivable balance is $39,400.How many days on average does it take the firm to collect its accounts receivable?

Correct AnswerverifiedShow Answer

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Correct Answer
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