Question 1

DM Electronics has projected sales of $1,700, $1,900, $2,400, and $4,200 for Quarters 1 to 4, respectively. Sales in the following year are projected to be 4 percent greater in each quarter. Assume purchases during each quarter equal 48 percent of projected sales for the following quarter. How much will be paid to suppliers in Quarter 2 if its accounts payable period is 30 days?

Accepted Answer

A)   $1,146
B)   $1,108
C)   $1,072
D)   $1,251
E)   $984F) C) and E)
G) C) and D)

Question 2

Your bank offers you a line of credit of $35,000 with an interest rate of 1.95 percent per quarter. The loan agreement also requires that 2 percent of the unused portion of the credit line be deposited in a non-interest-bearing account as a compensating balance. Your short-term investments are paying .17 percent per month. What is your effective annual interest rate on this arrangement if you do not borrow any money during the year? Assume any funds borrowed or invested use compound interest.

Accepted Answer

A)   8.19 percent
B)   2.06 percent
C)   2.18 percent
D)   8.03 percent
E)   8.11 percentF) C) and D)
G) All of the above

Question 3

Metal Designs historically produced products for inventory. Now, they only produce a product when an actual order is received from a customer. All else equal, this change will:

Accepted Answer

A)   increase the operating cycle.
B)   lengthen the accounts receivable period.
C)   shorten the accounts payable period.
D)   decrease the cash cycle.
E)   decrease the inventory turnover rate.F) A) and E)
G) B) and C)

Question 4

Which one of the following managers determines which customers must pay cash and which can charge their purchases?

Accepted Answer

A)   Purchasing manager
B)   Credit manager
C)   Controller
D)   Production manager
E)   Payables managerF) All of the above
G) A) and E)

Question 5

A firm with a flexible short-term financial policy will:

Accepted Answer

A)   maintain a low balance in accounts receivables.
B)   only have minimal amounts, if any, invested in marketable securities.
C)   invest heavily in inventory.
D)   have low cash balances.
E)   have tight restrictions on granting credit to customers.F) C) and E)
G) A) and D)

Question 6

Which one of the following actions will tend to increase the accounts receivable period from its current 14 days?

Accepted Answer

A)   Tightening the standards for granting credit to customers
B)   Refusing to grant additional credit to any customer who pays late
C)   Increasing the finance charges applied to all customer balances outstanding over 30 days
D)   Granting discounts for cash sales
E)   Eliminating the discount for early payment by credit customersF) All of the above
G) A) and B)

Question 7

The Lumber Mart recently replaced its management team. As a result, they are implementing a restrictive short-term financial policy in place of the flexible policy under which they had been operating. Which one of the following should the employees expect as a result of this policy change?

Accepted Answer

A)   Increasing monthly sales as compared to the prior year
B)   Greater inventory selection
C)   Fewer out-of-stock occurrences
D)   Loss of credit customers
E)   More liberal credit termsF) A) and E)
G) C) and D)

Question 8

Wake-Up Coffee has projected next year's quarterly sales at $960, $890, $980, and $1,050 for Quarters 1 to 4, respectively. Accounts receivable at the beginning of the year are $212 and the collection period is 18 days. What is the amount of the accounts receivable balance at the end of Quarter 2? Assume a year has 360 days.

Accepted Answer

A)   $212
B)   $207
C)   $178
D)   $184
E)   $167F) C) and D)
G) B) and C)

Question 9

Mid-Western Markets has sales of $1,389,400 and costs of goods sold of $892,700. Beginning inventory is $94,300 and ending inventory is $110,200. What is the inventory turnover rate?

Accepted Answer

A)   8.73 times
B)   10.78 times
C)   13.59 times
D)   11.37 times
E)   12.64 timesF) A) and B)
G) C) and E)

Question 10

Which one of the following actions represents a source of cash?

Accepted Answer

A)   Granting credit to a customer
B)   Purchasing new machinery
C)   Making a payment on a bank loan
D)   Purchasing inventory
E)   Accepting credit from a supplierF) A) and B)
G) C) and D)

Question 11

Rossiter's currently has a cash cycle of 43.4 days. Assume the operations are changed such that the receivables period decreases by 2.6 days, the inventory period by increases by 1.3 days, and the payables period increases by 3.4 days. What will be the length of the cash cycle after these changes?

Accepted Answer

A)   39.2 days
B)   45.5 days
C)   38.7 days
D)   41.3 days
E)   48.1 daysF) A) and B)
G) D) and E)

Question 12

Which one of these actions will increase the operating cycle? Assume all else held constant.

Accepted Answer

A)   Decreasing the payables period
B)   Decreasing the receivables turnover rate
C)   Increasing the payables period
D)   Decreasing the average inventory level
E)   Increasing the inventory turnover rateF) A) and D)
G) A) and E)

Question 13

The length of time between the day an item is purchased from a supplier until the day that supplier is paid for that purchase is called the:

Accepted Answer

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

Question 14

As of the beginning of the quarter, Callahan's had a cash balance of $710. During the quarter, the company collected $1,860 from customers and paid suppliers $1,520. The company also paid a loan payment of $320 and a tax payment of $510. What is Callahan's cash balance at the end of the quarter?

Accepted Answer

A)   $110
B)   $290
C)   $220
D)   $150
E)   $90F) C) and E)
G) A) and E)

Question 15

AC Corporation has beginning inventory of $11,062, accounts payable of $8,010, and accounts receivable of $7,844. The end of year values are $11,362 for inventory, $7,898 for accounts payable, and $8,029 for accounts receivable. Net sales are $109,100 and costs of goods sold are $56,220. How many days are in the cash cycle?

Accepted Answer

A)   47.7 days
B)   80.2 days
C)   55.8 days
D)   97.9 days
E)   67.8 daysF) A) and B)
G) B) and D)

Question 16

Which one of the following statements is correct concerning a company's cash balance?

Accepted Answer

A)   Most firms attempt to maintain a zero cash balance at all times.
B)   The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum desired cash balance.
C)   On a cash balance report, the cumulative cash surplus at the end of May is used as June's beginning cash balance.
D)   A cumulative cash deficit indicates a borrowing need.
E)   The ending cash balance must equal the minimum desired cash balance.F) A) and B)
G) A) and C)

Question 17

A decrease in which one of the following will increase the cash cycle, all else held constant?

Accepted Answer

A)   Payables turnover
B)   Days sales in inventory
C)   Operating cycle
D)   Inventory turnover rate
E)   Accounts receivable periodF) B) and D)
G) C) and E)

Question 18

Costs that decrease as a company acquires additional current assets are called ________ costs.

Accepted Answer

A)   carrying
B)   shortage
C)   debt
D)   equity
E)   payablesF) A) and D)
G) C) and D)

Question 19

S&S Sporting Goods has expected sales of $970, $910, $840, and $920 for the months of January through April, respectively. The accounts receivable period is 33 days. What is the accounts receivable balance at the end of February? Assume each month has 30 days.

Accepted Answer

A)   $1,007
B)   $989
C)   $1,102
D)   $910
E)   $1,068F) B) and E)
G) C) and D)

Question 20

Which type of arrangement is a hardware store most apt to use to finance its inventory?

Accepted Answer

A)   Accounts receivable assignment
B)   Blanket inventory lien
C)   Trust receipt
D)   Commercial paper
E)   Field warehouse financingF) B) and E)
G) A) and B)

Exam 18: Short Term Finance and Planning

Correct Answer
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Correct Answer
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A firm with a flexible short-term financial policy will:

Correct Answer
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Rossiter's currently has a cash cycle of 43.4 days. Assume the operations are changed such that the receivables period decreases by 2.6 days, the inventory period by increases by 1.3 days, and the payables period increases by 3.4 days. What will be the length of the cash cycle after these changes?

Correct Answer
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Correct Answer
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Which one of the following actions will tend to increase the accounts receivable period from its current 14 days?

Correct Answer
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Costs that decrease as a company acquires additional current assets are called ________ costs.

Correct Answer
verified

Which type of arrangement is a hardware store most apt to use to finance its inventory?

Correct Answer
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S&S Sporting Goods has expected sales of $970, $910, $840, and $920 for the months of January through April, respectively. The accounts receivable period is 33 days. What is the accounts receivable balance at the end of February? Assume each month has 30 days.

Correct Answer
verified

Mid-Western Markets has sales of $1,389,400 and costs of goods sold of $892,700. Beginning inventory is $94,300 and ending inventory is $110,200. What is the inventory turnover rate?

Correct Answer
verified

Metal Designs historically produced products for inventory. Now, they only produce a product when an actual order is received from a customer. All else equal, this change will:

Correct Answer
verified

Which one of the following statements is correct concerning a company's cash balance?

Correct Answer
verified

Correct Answer
verified

Which one of the following actions represents a source of cash?

Correct Answer
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Which one of these actions will increase the operating cycle? Assume all else held constant.

Correct Answer
verified

The length of time between the day an item is purchased from a supplier until the day that supplier is paid for that purchase is called the:

Correct Answer
verified

As of the beginning of the quarter, Callahan's had a cash balance of $710. During the quarter, the company collected $1,860 from customers and paid suppliers $1,520. The company also paid a loan payment of $320 and a tax payment of $510. What is Callahan's cash balance at the end of the quarter?

Correct Answer
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Which one of the following managers determines which customers must pay cash and which can charge their purchases?

Correct Answer
verified

The Lumber Mart recently replaced its management team. As a result, they are implementing a restrictive short-term financial policy in place of the flexible policy under which they had been operating. Which one of the following should the employees expect as a result of this policy change?

Correct Answer
verified

A decrease in which one of the following will increase the cash cycle, all else held constant?

Correct Answer
verified

Exam 18: Short Term Finance and Planning

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm with a flexible short-term financial policy will:

Correct AnswerverifiedShow Answer

Rossiter's currently has a cash cycle of 43.4 days. Assume the operations are changed such that the receivables period decreases by 2.6 days, the inventory period by increases by 1.3 days, and the payables period increases by 3.4 days. What will be the length of the cash cycle after these changes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following actions will tend to increase the accounts receivable period from its current 14 days?

Correct AnswerverifiedShow Answer

Costs that decrease as a company acquires additional current assets are called ________ costs.

Correct AnswerverifiedShow Answer

Which type of arrangement is a hardware store most apt to use to finance its inventory?

Correct AnswerverifiedShow Answer

S&S Sporting Goods has expected sales of $970, $910, $840, and $920 for the months of January through April, respectively. The accounts receivable period is 33 days. What is the accounts receivable balance at the end of February? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

Mid-Western Markets has sales of $1,389,400 and costs of goods sold of $892,700. Beginning inventory is $94,300 and ending inventory is $110,200. What is the inventory turnover rate?

Correct AnswerverifiedShow Answer

Metal Designs historically produced products for inventory. Now, they only produce a product when an actual order is received from a customer. All else equal, this change will:

Correct AnswerverifiedShow Answer

Which one of the following statements is correct concerning a company's cash balance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following actions represents a source of cash?

Correct AnswerverifiedShow Answer

Which one of these actions will increase the operating cycle? Assume all else held constant.

Correct AnswerverifiedShow Answer

The length of time between the day an item is purchased from a supplier until the day that supplier is paid for that purchase is called the:

Correct AnswerverifiedShow Answer

As of the beginning of the quarter, Callahan's had a cash balance of $710. During the quarter, the company collected $1,860 from customers and paid suppliers $1,520. The company also paid a loan payment of $320 and a tax payment of $510. What is Callahan's cash balance at the end of the quarter?

Correct AnswerverifiedShow Answer

Which one of the following managers determines which customers must pay cash and which can charge their purchases?

Correct AnswerverifiedShow Answer

The Lumber Mart recently replaced its management team. As a result, they are implementing a restrictive short-term financial policy in place of the flexible policy under which they had been operating. Which one of the following should the employees expect as a result of this policy change?

Correct AnswerverifiedShow Answer

A decrease in which one of the following will increase the cash cycle, all else held constant?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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