Question 1

On any given day, Marlene's receives and deposits numerous checks worth an average combined total of $2,348.The funds from these checks are generally available in 1.5 days.Every day the firm mails out checks totaling $1,900 that generally take 1.7 days to clear the bank.What is the amount of the disbursement float if the opening bank balance was $1,015 with no outstanding items?

Accepted Answer

A)  $2,850
B)  $2,950
C)  $3,800
D)  $3,230
E)  $3,865F) C) and D)
G) A) and D)

Question 2

Which statement is correct?

Accepted Answer

A)  Commercial paper is highly marketable.
B)  All T-bills are issued with 90-day maturities.
C)  A certificate of deposit is a short-term loan to the government.
D)  Any CD with a face amount of $10,000 or more is classified as a jumbo CD.
E)  Money market preferred securities have less price volatility than ordinary preferred.F) A) and D)
G) A) and B)

Question 3

A firm grants credit with terms of 2/10, net 30.The firm's customers have ___ days to pay in order to receive a _____ percent discount.

Accepted Answer

A)  2; 10
B)  10; 2
C)  15; 2
D)  20; 2
E)  30; 20F) A) and B)
G) D) and E)

Question 4

BJ's just reconciled its bank account and has $10,800 in outstanding deposits, $26,300 in checks outstanding, and a positive checkbook balance.The firm sells on a cash-only basis and deposits its receipts at the bank daily.The deposited funds are available to the firm the following day.The firm writes and mails checks on a daily basis also.These checks generally clear the bank in three days.What do you know about the firm's float given this information?

Accepted Answer

A)  The firm has disbursements float but no collection float.
B)  The collection float generally exceeds the disbursement float.
C)  The firm has a net collection float.
D)  The disbursement float generally exceeds the collection float.
E)  Since transactions occur daily, the firm has no float.F) None of the above
G) B) and D)

Question 5

The optimal credit policy of any firm will:

Accepted Answer

A)  maximize sales.
B)  minimize bad debts.
C)  maximize units sold.
D)  minimize the total costs of granting credit.
E)  minimize carrying costs.F) B) and E)
G) C) and D)

Question 6

You purchased an item costing $4,895 on April 15.The terms of sale were 2/7, net 15.What is the last day you can pay the discounted price?

Accepted Answer

A)  April 22
B)  April 31
C)  April 29
D)  April 17
E)  April 21F) A) and D)
G) A) and C)

Question 7

Which of these is a shortage cost?

Accepted Answer

A)  Restocking cost
B)  Opportunity cost of capital
C)  Inventory obsolescence
D)  Insurance cost
E)  Inventory theftF) None of the above
G) A) and D)

Question 8

Cymbal Sales sells 725 musical instruments a year at an average price per instrument of $750.All sales are credit sales with terms of 2/10, net 30.The company has found that 67 percent of its customers take advantage of the discounted price.What is the amount of the firm's average accounts receivable? The discount amount is applied to a customer's account only after payments have been received and processed.Assume a 365-day year.

Accepted Answer

A)  $23,565
B)  $24,729
C)  $25,890
D)  $26,825
E)  $26,100F) C) and E)
G) B) and E)

Question 9

How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Accepted Answer

A)  Immediately
B)  In one day
C)  Between one and two days
D)  In two days
E)  Between two and three daysF) B) and E)
G) None of the above

Question 10

Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately, the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Accepted Answer

A)  Collection float increased
B)  Collection float decreased
C)  Disbursement float increased
D)  Disbursement float decreased
E)  Net float remained unchangedF) A) and B)
G) C) and D)

Question 11

Which one of the following is most commonly used in international trades?

Accepted Answer

A)  Sight draft
B)  Time draft
C)  Commercial paper
D)  Banker's acceptance
E)  Open accountF) A) and B)
G) B) and C)

Question 12

To minimize collection float, a firm should do which of the following?
I.Deposit its collections at least daily
II.Make sure all checks it receives at the sales counter are properly dated and signed
III.Pay its bills in a more timely manner
IV.Eliminate its regional lockboxes and have only one central lockbox located near the firm's home office

Accepted Answer

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

Question 13

A bill given to a customer for goods he or she purchased is called a(n) :

Accepted Answer

A)  account reconciliation.
B)  invoice.
C)  docket.
D)  remittance advice.
E)  shipping receipt.F) None of the above
G) A) and B)

Question 14

Float is defined as the difference between the:

Accepted Answer

A)  beginning and ending cash balances as shown on a cash budget.
B)  ledger balance and the available balance.
C)  book balance and the ledger balance.
D)  collections and disbursements for any given period of time.
E)  available balance and the collected balance.F) B) and C)
G) A) and E)

Question 15

Roberts Trucking writes two checks a day for an average amount of $17,750 each.These checks generally clear the bank 2.3 days after they are written.In addition, the firm generally receives and deposits checks amounting to $25,650 each day.All deposits are available the next day.What is the firm's net float?

Accepted Answer

A)  Net collection float of $25,650
B)  Net collection float of $56,000
C)  Net collection float of $107,300
D)  Net disbursement float of $56,000
E)  Net disbursement float of $107,300F) A) and B)
G) A) and C)

Question 16

Eastlake's has an average collection period of 25 days.Its average daily investment in accounts receivables is $43,566.What are its annual credit sales? Assume a 365-day year.

Accepted Answer

A)  $530,053
B)  $636,064
C)  $512,955
D)  $505,928
E)  $522,792F) B) and E)
G) D) and E)

Question 17

On April 14, Robertsons's purchased $10,200 worth of inventory.The terms of sale were 3/10, net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Accepted Answer

A)  $300; 14.95
B)  $306; 74.35
C)  $306; 25.65
D)  $300; 25.65
E)  $400; 44.59F) C) and D)
G) A) and B)

Question 18

The UpTowner writes 39 checks a day for an average amount of $918 each.These checks generally clear the bank 2.5 days after they are written.In addition, the firm generally receives an average of $53,419 a day in checks.The checks that are received are deposited immediately and the funds are generally available the following day.What is the amount of the firm's disbursement float?

Accepted Answer

A)  $36,086
B)  $89,505
C)  $17,333
D)  $53,419
E)  $106,838F) A) and E)
G) A) and B)

Question 19

Which of these is the best example of a raw material?

Accepted Answer

A)  Set of tires for an automaker
B)  Partially assembled airplane
C)  Cabinets ready to be shipped
D)  Can of paint waiting to be sold
E)  Completed product awaiting customer deliveryF) A) and D)
G) A) and C)

Question 20

Which of these practices will reduce a firm's collection float?
I.Installing a lockbox system
II.Utilizing zero-balance accounts
III.Depositing checks daily rather than weekly
IV.Reducing the processing delay by one day

Accepted Answer

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

Exam 17: Working Capital Management

A bill given to a customer for goods he or she purchased is called a(n) :

Correct Answer
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Float is defined as the difference between the:

Correct Answer
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Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately, the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Correct Answer
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Which statement is correct?

Correct Answer
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Eastlake's has an average collection period of 25 days.Its average daily investment in accounts receivables is $43,566.What are its annual credit sales? Assume a 365-day year.

Correct Answer
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Correct Answer
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You purchased an item costing $4,895 on April 15.The terms of sale were 2/7, net 15.What is the last day you can pay the discounted price?

Correct Answer
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Correct Answer
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On April 14, Robertsons's purchased $10,200 worth of inventory.The terms of sale were 3/10, net 30.The implicit interest is _ and the effective annual rate is _ percent.

Correct Answer
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How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Correct Answer
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Which of these is the best example of a raw material?

Correct Answer
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Which of these practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

Correct Answer
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The optimal credit policy of any firm will:

Correct Answer
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Which of these is a shortage cost?

Correct Answer
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Correct Answer
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Which one of the following is most commonly used in international trades?

Correct Answer
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A firm grants credit with terms of 2/10, net 30.The firm's customers have _ days to pay in order to receive a ___ percent discount.

Correct Answer
verified

Exam 17: Working Capital Management

A bill given to a customer for goods he or she purchased is called a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Float is defined as the difference between the:

Correct AnswerverifiedShow Answer

Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately, the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Eastlake's has an average collection period of 25 days.Its average daily investment in accounts receivables is $43,566.What are its annual credit sales? Assume a 365-day year.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You purchased an item costing $4,895 on April 15.The terms of sale were 2/7, net 15.What is the last day you can pay the discounted price?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On April 14, Robertsons's purchased $10,200 worth of inventory.The terms of sale were 3/10, net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Correct AnswerverifiedShow Answer

How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Correct AnswerverifiedShow Answer

Which of these is the best example of a raw material?

Correct AnswerverifiedShow Answer

Which of these practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

Correct AnswerverifiedShow Answer

The optimal credit policy of any firm will:

Correct AnswerverifiedShow Answer

Which of these is a shortage cost?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is most commonly used in international trades?

Correct AnswerverifiedShow Answer

A firm grants credit with terms of 2/10, net 30.The firm's customers have ___ days to pay in order to receive a _____ percent discount.

Correct AnswerverifiedShow Answer

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On April 14, Robertsons's purchased $10,200 worth of inventory.The terms of sale were 3/10, net 30.The implicit interest is _ and the effective annual rate is _ percent.

Correct Answer
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Correct Answer
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Correct Answer
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A firm grants credit with terms of 2/10, net 30.The firm's customers have _ days to pay in order to receive a ___ percent discount.

Correct Answer
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