Question 1

Brown's Furniture Outlet has an accounts receivable period of 42 days and an accounts payable period of 96 days. The company turns over its inventory 2.8 times per year and marks up the inventory an average of 45 percent over its wholesale cost. What is the length of the firm's operating cycle?

Accepted Answer

A)   168.47 days
B)   172.36 days
C)   189.22 days
D)   201.33 days
E)   205.68 daysF) A) and C)
G) A) and D)

Question 2

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

Question 3

Which one of the following is a graphical representation of the operating and cash cycles?

Accepted Answer

A)   Operations line
B)   Production period
C)   Cash flow time line
D)   Inventory flow chart
E)   Customer service lineF) B) and D)
G) A) and D)

Question 4

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) C) and D)
G) A) and E)

Question 5

Which of the following are sources of cash? I. decreasing accounts receivable
II)  increasing inventory
III)  increasing accounts payable
IV)  increasing common stock

Accepted Answer

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

Question 6

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will? I. uncollectable accounts receivables
II)  work stoppages for lack of raw materials
III)  carrying costs
IV)  obsolete or out-of-date inventory

Accepted Answer

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

Question 7

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) A) and E)
G) All of the above

Question 8

A committed line of credit:

Accepted Answer

A)   guarantees that a set amount of funds will be available to a firm for a stated period of time regardless of events that might occur during that time period.
B)   is a guarantee that a bank will purchase a firm's accounts receivables at full value.
C)   provides greater assurance than a noncommitted credit line that funds will be available when needed by a firm.
D)   guarantees that any funds borrowed during a stated period of time will be charged the lowest rate of interest the lending bank offers to any of its customers.
E)   is a loan arrangement for a stated period of time which is free of all costs and fees other than the actual interest paid on the funds borrowed.F) A) and E)
G) C) and D)

Question 9

An increase in the accounts receivable period will do which one of the following?

Accepted Answer

A)   Lengthen the accounts payable period
B)   Shorten the inventory period
C)   Shorten the operating cycle
D)   Lengthen the cash cycle
E)   Shorten the accounts payable periodF) A) and E)
G) D) and E)

Question 10

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 noninterest-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) A) and B)
G) B) and C)

Question 11

Aftermarket Auto Parts has the following estimated sales.  Purchases are equal to 68 percent of the following quarter's sales. The accounts payable period is 60 days. Assume there are 30 days in each month. How much will the firm owe its suppliers at the end of quarter three?

Accepted Answer

A)   $3,718
B)   $3,967
C)   $5,502
D)   $7,435
E)   $7,933F) All of the above
G) A) and C)

Question 12

Baxter's has the following estimated quarterly sales for next year.  The accounts receivable period is 60 days. What is the expected accounts receivable balance at the end of the second quarter? Assume each month has 30 days.

Accepted Answer

A)   $4,400
B)   $5,600
C)   $8,800
D)   $12,000
E)   $12,600F) D) and E)
G) B) and E) C

Question 13

Can a firm have a negative cash cycle? If yes, explain how that can occur and discuss whether or not that would be good for a firm. If no, explain why that cannot occur and why preventing it from occurring is good for a firm.

Accepted Answer

A negative cash cycle can occur if a fir...

Question 14

Augustino's has the following estimated sales.  Purchases are equal to 64 percent of the following quarter's sales. The accounts receivable period is 45 days and the accounts payable period is 60 days. Assume there are 30 days in each month. How much will the firm pay its suppliers in the third quarter?

Accepted Answer

A)   $7,211
B)   $7,656
C)   $8,405
D)   $8,520
E)   $8,889F) All of the above
G) A) and C) C

Question 15

Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Accepted Answer

A)   Inventory period remains constant
B)   Cash cycle increases
C)   Inventory turnover rate increases
D)   Accounts receivable turnover rate increases
E)   Cash cycle remains constantF) C) and D)
G) A) and E)

Question 16

Pannick Motors has projected the following sales for the coming year:  Sales in the year following this one are projected to be 12 percent greater in each quarter. Assume the company places orders during each quarter equal to 45 percent of projected sales for the next quarter. How much will the firm pay its suppliers in quarter 3, if the firm has a 60-day payables period?

Accepted Answer

A)   $408
B)   $427
C)   $463
D)   $489
E)   $511F) C) and D)
G) B) and E)

Question 17

The Hot Truck operates several specialty vehicles that provide hot food and beverages for firms that have workers employed in outlying regions. The company has annual sales of $337,600. Cost of goods sold average 48 percent of sales and the profit margin is 5.2 percent. The average accounts receivable balance is $44,700. On average, how long does it take The Hot Truck to collect payment for its services?

Accepted Answer

A)   23.84 days
B)   24.17 days
C)   47.67 days
D)   48.33 days
E)   51.90 daysF) A) and B)
G) B) and D)

Question 18

Which one of the following actions is indicative of a restrictive short-term financial policy?

Accepted Answer

A)   Granting increasing amounts of credit to customers
B)   Expanding the number of inventory items carried
C)   Increasing the firm's investment in the current accounts
D)   Minimizing the cash balances held by the firm
E)   Investing relatively large amounts in marketable securitiesF) A) and B)
G) A) and C) D

Question 19

The Cookie Stop's purchases are equal to 60 percent of the following month's sales. The accounts payable period for purchases is 30 days while all other expenditures are paid in the month they are incurred. Assume each month has 30 days. The company has compiled the following information.  What is the total amount of the firm's disbursements for the month of May?

Accepted Answer

A)   $5,990
B)   $6,170
C)   $6,410
D)   $6,520
E)   $6,730F) A) and E)
G) B) and E)

Question 20

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) A) and B)
G) B) and C)

Exam 16: Short-Term Financial Planning

Brown's Furniture Outlet has an accounts receivable period of 42 days and an accounts payable period of 96 days. The company turns over its inventory 2.8 times per year and marks up the inventory an average of 45 percent over its wholesale cost. What is the length of the firm's operating cycle?

Correct Answer
verified

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

Correct Answer
verified

Which one of the following is a graphical representation of the operating and cash cycles?

Correct Answer
verified

Which one of the following will increase the operating cycle?

Correct Answer
verified

Which of the following are sources of cash? I. decreasing accounts receivable II) increasing inventory III) increasing accounts payable IV) increasing common stock

Correct Answer
verified

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will? I. uncollectable accounts receivables II) work stoppages for lack of raw materials III) carrying costs IV) obsolete or out-of-date inventory

Correct Answer
verified

Which one of the following statements is correct?

Correct Answer
verified

A committed line of credit:

Correct Answer
verified

An increase in the accounts receivable period will do which one of the following?

Correct Answer
verified

Correct Answer
verified

Aftermarket Auto Parts has the following estimated sales. Purchases are equal to 68 percent of the following quarter's sales. The accounts payable period is 60 days. Assume there are 30 days in each month. How much will the firm owe its suppliers at the end of quarter three?

Correct Answer
verified

Baxter's has the following estimated quarterly sales for next year. The accounts receivable period is 60 days. What is the expected accounts receivable balance at the end of the second quarter? Assume each month has 30 days.

Correct Answer
verified
C

Can a firm have a negative cash cycle? If yes, explain how that can occur and discuss whether or not that would be good for a firm. If no, explain why that cannot occur and why preventing it from occurring is good for a firm.

Correct Answer
verified
A negative cash cycle can occur if a fir...
View Answer

Correct Answer
verified
C

Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which one of the following actions is indicative of a restrictive short-term financial policy?

Correct Answer
verified
D

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

Exam 16: Short-Term Financial Planning

Brown's Furniture Outlet has an accounts receivable period of 42 days and an accounts payable period of 96 days. The company turns over its inventory 2.8 times per year and marks up the inventory an average of 45 percent over its wholesale cost. What is the length of the firm's operating cycle?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following is a graphical representation of the operating and cash cycles?

Correct AnswerverifiedShow Answer

Which one of the following will increase the operating cycle?

Correct AnswerverifiedShow Answer

Which of the following are sources of cash? I. decreasing accounts receivable II) increasing inventory III) increasing accounts payable IV) increasing common stock

Correct AnswerverifiedShow Answer

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will? I. uncollectable accounts receivables II) work stoppages for lack of raw materials III) carrying costs IV) obsolete or out-of-date inventory

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

A committed line of credit:

Correct AnswerverifiedShow Answer

An increase in the accounts receivable period will do which one of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Aftermarket Auto Parts has the following estimated sales. Purchases are equal to 68 percent of the following quarter's sales. The accounts payable period is 60 days. Assume there are 30 days in each month. How much will the firm owe its suppliers at the end of quarter three?

Correct AnswerverifiedShow Answer

Baxter's has the following estimated quarterly sales for next year. The accounts receivable period is 60 days. What is the expected accounts receivable balance at the end of the second quarter? Assume each month has 30 days.

Correct AnswerverifiedC

Can a firm have a negative cash cycle? If yes, explain how that can occur and discuss whether or not that would be good for a firm. If no, explain why that cannot occur and why preventing it from occurring is good for a firm.

Correct AnswerverifiedA negative cash cycle can occur if a fir...View AnswerShow Answer

Correct AnswerverifiedC

Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following actions is indicative of a restrictive short-term financial policy?

Correct AnswerverifiedD

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified
A negative cash cycle can occur if a fir...
View Answer

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified