Question 1

A supplier offers credit terms of 2/15,net 45.This means that

Accepted Answer

A)  a 2 percent surcharge will be added to any invoice not paid within 15 days.
B)  all purchases must be paid in full within 30 days.
C)  a monthly interest rate equal to 2/15ths of one percent will be added to any invoice not paid within 45 days.
D)  a 2 percent discount can be taken if a purchase is paid within 15 days with the full amount due in 45 days.
E)  2 percent of the invoice must be paid within 15 days with the balance paid within 45 days.F) A) and D)
G) B) and D)

Question 2

Super Mart has sales of $542,300.The cost of goods sold is equal to 59 percent of sales.The beginning accounts receivable balance is $86,534,and the ending accounts receivable balance is $84,209.How long on average does it take the firm to collect its receivables?

Accepted Answer

A)  57.46 days
B)  66.08 days
C)  39.19 days
D)  43.92 days
E)  49.11 daysF) All of the above
G) C) and E)

Question 3

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

Accepted Answer

A)  The cash cycle starts when inventory is purchased.
B)  The longer the cash cycle,the more likely a firm will need external financing.
C)  Increasing the accounts payable period increases the cash cycle.
D)  The cash cycle can exceed the operating cycle if the payables period is equal to zero.
E)  Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.F) B) and C)
G) C) and D)

Question 4

Which financial policy,or policies,uses both marketable securities and short-term financing to fund seasonal variations in asset needs?

Accepted Answer

A)  Both the flexible and the compromise financial policies
B)  Flexible financial policy only
C)  Compromise financial policy only
D)  Restrictive financial policy only
E)  Both the restrictive and the compromise financial policiesF) B) and E)
G) A) and B)

Question 5

HM Industries has a beginning receivables balance on January 1st of $484.Sales for January through April are $420,$364,$390,and $433,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a 360-day year.

Accepted Answer

A)  $420
B)  $364
C)  $377
D)  $390
E)  $392F) A) and D)
G) All of the above

Question 6

Blackwell Co.has credit sales of $317,428,costs of goods sold of $151,217,and average accounts receivable of $28,744.How long on average does it take the firm's credit customers to pay for their purchases?

Accepted Answer

A)  27.99 days
B)  33.05 days
C)  38.23 days
D)  31.37 days
E)  29.95 daysF) All of the above
G) B) and C)

Question 7

A monthly cumulative cash deficit indicates that a firm

Accepted Answer

A)  is facing long-term financial distress.
B)  will go out of business within the year.
C)  is using its cash wisely.
D)  is capable of funding all of its needs internally.
E)  has at least a short-term need for external funding.F) A) and E)
G) A) and C)

Question 8

The primary difference between a line of credit and a revolving credit arrangement is the

Accepted Answer

A)  length of the time period covered by the loan agreement.
B)  type of collateral used to secure the loan.
C)  fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured.
D)  fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured.
E)  fact that the revolving credit arrangement requires a cleanup period but the line of credit does not.F) C) and E)
G) A) and D) A

Question 9

Shortage costs include

Accepted Answer

A)  all costs that increase with increased current assets.
B)  production stoppages due to lack of materials and also lost customer goodwill.
C)  increased sales due to inventory selection and increased order costs.
D)  increased insurance costs on inventory and an increased rate of return on assets.
E)  increased uses of cash for net working capital and stockouts.F) A) and B)
G) C) and E)

Question 10

Smith and Johnson have expected sales of $427,$489,$626,and $738 for the months of January through April,respectively.The accounts receivable period is 15 days.How much did the firm collect in the month of April? Assume a 360-day year.

Accepted Answer

A)  $626
B)  $558
C)  $738
D)  $313
E)  $682F) A) and B)
G) B) and E)

Question 11

The most common means of financing a temporary cash deficit is a

Accepted Answer

A)  short-term issue of corporate bonds.
B)  short-term secured bank loan.
C)  short-term unsecured bank loan.
D)  long-term unsecured bank loan.
E)  long-term secured bank loan.F) C) and D)
G) None of the above

Question 12

True Blue Stores had a beginning accounts payable balance of $87,300 and an ending accounts payable balance of $79,460.Sales for the period were $702,000,and costs of goods sold were $423,600.What is the payables turnover rate?

Accepted Answer

A)  6.98 times
B)  5.08 times
C)  8.23 times
D)  9.28 times
E)  7.01 timesF) A) and B)
G) D) and E)

Question 13

An increase in which one of the following will decrease the cash cycle,all else equal?

Accepted Answer

A)  Payables turnover
B)  Days sales in inventory
C)  Operating cycle
D)  Inventory turnover rate
E)  Accounts receivable periodF) None of the above
G) A) and D)

Question 14

Which of the following could be the cause of a lengthening cash cycle?

Accepted Answer

A)  Increasing the inventory turnover
B)  Issuing credit to less credit-worthy customers than in previous periods
C)  Increasing the accounts payable period
D)  Extending the time period before paying a supplier for a credit purchase
E)  Offering customers cash discounts for prompt paymentF) All of the above
G) A) and B) B

Question 15

Which one of the following actions will tend to increase the accounts receivable period?

Accepted Answer

A)  Increasing the finance charges applied to all customer balances outstanding over 30 days
B)  Increasing the discount for early payment by credit customers
C)  Granting discounts for cash sales
D)  Loosening the standards for granting credit to customers
E)  Refusing credit to all existing and future customersF) A) and E)
G) A) and B)

Question 16

Which one of the following is a use of cash?

Accepted Answer

A)  Acquisition of bank loan
B)  Sale of common stock
C)  Sale of marketable securities
D)  Decrease in accounts payable
E)  Decrease in inventoryF) B) and D)
G) A) and D)

Question 17

Which one of the following will decrease the operating cycle?

Accepted Answer

A)  Paying accounts payable faster
B)  Discontinuing the discount given for early payment of an accounts receivable
C)  Decreasing the inventory turnover rate
D)  Collecting accounts receivable faster
E)  Increasing the accounts payable turnover rateF) A) and E)
G) B) and D)

Question 18

Which one of the following is a source of cash?

Accepted Answer

A)  An increase in inventory
B)  An increase in fixed assets
C)  A decrease in long-term debt
D)  The payment of a cash dividend
E)  A decrease in accounts receivableF) A) and B)
G) D) and E)

Question 19

Which one of the following will increase net working capital? Assume the current ratio is positive.

Accepted Answer

A)  Using cash to pay an accounts payable
B)  Using cash to pay a long-term debt
C)  Selling inventory at cost
D)  Collecting an accounts receivable
E)  Using a long-term loan to buy inventoryF) A) and D)
G) None of the above E

Question 20

Candy Corner has an inventory turnover rate of 14.6,an accounts payable period of 43.7 days,and an accounts receivable period of 32.4 days.What is the length of the cash cycle?

Accepted Answer

A)  14.2 days
B)  11.8 days
C)  12.1 days
D)  17.3 days
E)  13.7 daysF) All of the above
G) None of the above

Exam 18: Short-Term Finance and Planning

A supplier offers credit terms of 2/15,net 45.This means that

Correct AnswerverifiedShow Answer

Super Mart has sales of $542,300.The cost of goods sold is equal to 59 percent of sales.The beginning accounts receivable balance is $86,534,and the ending accounts receivable balance is $84,209.How long on average does it take the firm to collect its receivables?

Correct AnswerverifiedShow Answer

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

Correct AnswerverifiedShow Answer

Which financial policy,or policies,uses both marketable securities and short-term financing to fund seasonal variations in asset needs?

Correct AnswerverifiedShow Answer

HM Industries has a beginning receivables balance on January 1st of $484.Sales for January through April are $420,$364,$390,and $433,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a 360-day year.

Correct AnswerverifiedShow Answer

Blackwell Co.has credit sales of $317,428,costs of goods sold of $151,217,and average accounts receivable of $28,744.How long on average does it take the firm's credit customers to pay for their purchases?

Correct AnswerverifiedShow Answer

A monthly cumulative cash deficit indicates that a firm

Correct AnswerverifiedShow Answer

The primary difference between a line of credit and a revolving credit arrangement is the

Correct AnswerverifiedA

Shortage costs include

Correct AnswerverifiedShow Answer

Smith and Johnson have expected sales of $427,$489,$626,and $738 for the months of January through April,respectively.The accounts receivable period is 15 days.How much did the firm collect in the month of April? Assume a 360-day year.

Correct AnswerverifiedShow Answer

The most common means of financing a temporary cash deficit is a

Correct AnswerverifiedShow Answer

True Blue Stores had a beginning accounts payable balance of $87,300 and an ending accounts payable balance of $79,460.Sales for the period were $702,000,and costs of goods sold were $423,600.What is the payables turnover rate?

Correct AnswerverifiedShow Answer

An increase in which one of the following will decrease the cash cycle,all else equal?

Correct AnswerverifiedShow Answer

Which of the following could be the cause of a lengthening cash cycle?

Correct AnswerverifiedB

Which one of the following actions will tend to increase the accounts receivable period?

Correct AnswerverifiedShow Answer

Which one of the following is a use of cash?

Correct AnswerverifiedShow Answer

Which one of the following will decrease the operating cycle?

Correct AnswerverifiedShow Answer

Which one of the following is a source of cash?

Correct AnswerverifiedShow Answer

Which one of the following will increase net working capital? Assume the current ratio is positive.

Correct AnswerverifiedE

Candy Corner has an inventory turnover rate of 14.6,an accounts payable period of 43.7 days,and an accounts receivable period of 32.4 days.What is the length of the cash cycle?

Correct AnswerverifiedShow Answer

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HM Industries has a beginning receivables balance on January 1^st of $484.Sales for January through April are $420,$364,$390,and $433,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a 360-day year.

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A

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B

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E

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