Question 1

The Check Clearing Act for the 21stCentury has caused:

Accepted Answer

A)  increased check kiting.
B)  zero-balance accounts to disappear.
C)  the elimination of all lockboxes.
D)  a reduction in collection float, but not disbursement float.
E)  a reduction in both collection and disbursement float.F) A) and E)
G) None of the above

Question 2

When are funds generally transferred into zero-balance accounts?

Accepted Answer

A)  Monthly
B)  Weekly
C)  Daily
D)  As needed
E)  NeverF) B) and C)
G) A) and E)

Question 3

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

Accepted Answer

A)  Aging schedule
B)  Collection report
C)  Credit evaluation report
D)  Invoice schedule
E)  Terms of creditF) All of the above
G) B) and C)

Question 4

The Flowering Vine buys hanging plants for $4 each and resells them for $10.95 each.The firm sells 6,200 plants per year.Generally,the firm orders 250 plants at a time and has a fixed cost per order of $49.The carrying cost per unit is $22.32.To avoid newer plants mixing with older plants,the inventory is totally sold out before it is restocked.Given the current ordering system,the total annual carrying cost is ____ and the total annual restocking cost is ____.

Accepted Answer

A)  $2,811; $1,215
B)  $2,811; $1,269
C)  $2,790; $1,215
D)  $2,790; $1,225
E)  $3,212; $1,269F) A) and B)
G) A) and E)

Question 5

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

Question 6

During a normal month,Flo's Flowers receives a total of nine checks with a total value of $168,000.On average,it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Accepted Answer

A)  $5,600
B)  $73,000
C)  $50,400
D)  $100,800
E)  $28,600F) B) and D)
G) B) and E)

Question 7

A firm offers terms of 2/5,net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

Accepted Answer

A)  21.69 percent
B)  24.42 percent
C)  28.97 percent
D)  31.08 percent
E)  34.31 percentF) A) and B)
G) C) and D)

Question 8

Which of these is most apt to delay the collection of cash?

Accepted Answer

A)  Having customers mail checks to a local lockbox rather than the home office
B)  Depositing checks throughout the day
C)  Posting payments to accounts receivable prior to making deposits
D)  Collecting mail more frequently
E)  Supplying customers with bar coded payment slipsF) A) and B)
G) None of the above

Question 9

A disbursement account into which funds are transferred only as needed to cover the demands for payment is called a(n) ____ account.

Accepted Answer

A)  master
B)  controlled disbursement
C)  bank controlled
D)  investment
E)  safety stockF) C) and E)
G) A) and B)

Question 10

On any given day,a firm receives and deposits numerous checks worth an average combined total of $9,215.The funds from the deposited checks are generally available after two days.Every day,the firm mails out checks totaling $7,300 that generally take three days to clear the bank.What is the amount of the collection float if the opening bank balance was $9,200?

Accepted Answer

A)  $14,230
B)  $15,970
C)  $18,430
D)  $7,300
E)  $11,130F) B) and D)
G) A) and B)

Question 11

Which of these tends to create an unexpected increase in a firm's average collection period?

Accepted Answer

A)  Increased credit sales
B)  The implementation of a cash discount
C)  Increased customer delinquencies
D)  Increased dollar value per each sale
E)  Increased collection effortsF) B) and C)
G) C) and D)

Question 12

The graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy is called the:

Accepted Answer

A)  aging report.
B)  economic credit function.
C)  optimal credit curve.
D)  credit analysis graph.
E)  credit cost curve.F) C) and D)
G) A) and B)

Question 13

Which one of the 5 C's refers to the general economic climate in a customer's line of business?

Accepted Answer

A)  Capital
B)  Conditions
C)  Capacity
D)  Character
E)  CollateralF) C) and D)
G) D) and E)

Question 14

Which of these will tend to decrease the length of the credit period?

Accepted Answer

A)  Decrease in default risk
B)  Increase in the cost of the product
C)  Increase in competition
D)  Decrease in the size of the account
E)  Decrease in turnover rateF) B) and D)
G) B) and C)

Question 15

Which characteristic generally applies to commercial paper?

Accepted Answer

A)  Issued only by financial institutions
B)  Issued only by corporations
C)  Maturities limited to 90 days or less
D)  Unsecured
E)  Secured by accounts receivableF) A) and E)
G) A) and B)

Question 16

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) B) and C)
G) C) and E)

Question 17

Which of these will tend to decrease the credit period?

Accepted Answer

A)  Perishable product
B)  Long production and sales cycle
C)  Well-established customer
D)  Heavy reliance on sales to that particular customer
E)  Specialized new productF) C) and D)
G) B) and D)

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 D)
G) A) and C)

Question 19

The length of time a firm grants its customers to pay for their purchases is called the:

Accepted Answer

A)  lockbox period.
B)  discount period.
C)  credit period.
D)  cash cycle.
E)  receivables turnover periodF) C) and E)
G) A) and C)

Question 20

Which of these is a speculative motive for holding cash?

Accepted Answer

A)  Buying extra inventory because a key supplier offered a special one-time discount
B)  Paying a $100 bonus to all employees at year-end
C)  Paying the annual insurance premium on the firm's assets
D)  Needing to purchase a new delivery truck because the old one was totally destroyed in an accident
E)  Contributing $1,000 to help fund medical care for an uninsured neighborF) B) and D)
G) C) and D)

Exam 17: Working Capital Management

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

Correct Answer
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During a normal month,Flo's Flowers receives a total of nine checks with a total value of $168,000.On average,it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Correct Answer
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Correct Answer
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Correct Answer
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The Check Clearing Act for the 21^stCentury has caused:

Correct Answer
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The length of time a firm grants its customers to pay for their purchases is called the:

Correct Answer
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A firm offers terms of 2/5,net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

Correct Answer
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Correct Answer
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When are funds generally transferred into zero-balance accounts?

Correct Answer
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Which one of the 5 C's refers to the general economic climate in a customer's line of business?

Correct Answer
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A disbursement account into which funds are transferred only as needed to cover the demands for payment is called a(n) ____ account.

Correct Answer
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Correct Answer
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Which of these will tend to decrease the credit period?

Correct Answer
verified

Which of these is a speculative motive for holding cash?

Correct Answer
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Which of these tends to create an unexpected increase in a firm's average collection period?

Correct Answer
verified

Which of these is most apt to delay the collection of cash?

Correct Answer
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Which characteristic generally applies to commercial paper?

Correct Answer
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The graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy is called the:

Correct Answer
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Correct Answer
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Which of these will tend to decrease the length of the credit period?

Correct Answer
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Exam 17: Working Capital Management

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

Correct AnswerverifiedShow Answer

During a normal month,Flo's Flowers receives a total of nine checks with a total value of $168,000.On average,it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Check Clearing Act for the 21stCentury has caused:

Correct AnswerverifiedShow Answer

The length of time a firm grants its customers to pay for their purchases is called the:

Correct AnswerverifiedShow Answer

A firm offers terms of 2/5,net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When are funds generally transferred into zero-balance accounts?

Correct AnswerverifiedShow Answer

Which one of the 5 C's refers to the general economic climate in a customer's line of business?

Correct AnswerverifiedShow Answer

A disbursement account into which funds are transferred only as needed to cover the demands for payment is called a(n) ____ account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of these will tend to decrease the credit period?

Correct AnswerverifiedShow Answer

Which of these is a speculative motive for holding cash?

Correct AnswerverifiedShow Answer

Which of these tends to create an unexpected increase in a firm's average collection period?

Correct AnswerverifiedShow Answer

Which of these is most apt to delay the collection of cash?

Correct AnswerverifiedShow Answer

Which characteristic generally applies to commercial paper?

Correct AnswerverifiedShow Answer

The graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy is called the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of these will tend to decrease the length of the credit period?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The Check Clearing Act for the 21^stCentury has caused:

Correct Answer
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