Question 1

A ﬂexible short-term ﬁnancial policy:

Accepted Answer

A)   Increases the likelihood that a ﬁrm will face ﬁnancial distress.
B)   Incurs an opportunity cost due to the rate of return that applies to short-term assets.
C)   Advocates a smaller investment in net working capital than a restrictive policy does.
D)   Increases the probability that a ﬁrm will earn high returns on all of its assets.
E)   Utilizes short-term ﬁnancing to fund all of the ﬁrm's assets.

Question 2

Year Average  Credit Sales = $180,000 COGS = $135,000
How many days are in the cash cycle?

Accepted Answer

A)   71 days
B)   95 days
C)   99 days
D)   103 days
E)   107 days

Question 3

Provide a deﬁnition for the term cash budget.

Accepted Answer

A forecast of cash r...

Question 4

Receivable factoring represents an increase in cash.

Accepted Answer

A) True 
 B)False

Question 5

Mycale's has always paid its suppliers in 30 days. The company just hired a new ﬁnancial oﬃcer who is changing the policy such that suppliers will now be paid in 45 days. This change will ______
The accounts payable period and _______ the cash cycle.

Accepted Answer

A)   Increase; not affect
B)   Increase; increase
C)   Increase; decrease
D)   Decrease; increase
E)   Decrease; decrease

Question 6

All else the same, shortening the ﬁrm's cash cycle will likely____________ the ﬁrm's proﬁtability.

Accepted Answer

A)   Increase.
B)   Decrease.
C)   Not affect.
D)   Increase (only if earnings are already positive) .
E)   Decrease (provided the inventory period exceeds the accounts payable period) .

Question 7

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable
From the ﬁrm at a 2% discount. If the ﬁrm wishes to get its factoring costs below 11%, what is the
MAXIMUM days in receivables it can have?

Accepted Answer

A)   67 days
B)   70 days
C)   72 days
D)   75 days
E)   87 days

Question 8

A ﬂexible policy entails the use of marketable securities.

Accepted Answer

A) True 
 B)False

Question 9

Holly's Meat Markets has accumulated $128,900 in net working capital. Which one of the following will reduce this amount?

Accepted Answer

A)   A reduction in accounts payable.
B)   An increase in inventory.
C)   An increase in a current liability.
D)   A reduction in the cash balance.
E)   An increase in accounts receivable.

Question 10

Evans, Inc. has an inventory period of 36 days, an accounts payable period of 44 days, and an accounts receivable turnover rate of 20. What is the length of the cash cycle?

Accepted Answer

A)   10.25 days
B)   12.00 days
C)   26.25 days
D)   60.00 days
E)   61.75 days

Question 11

Which one of the following is a use of cash?

Accepted Answer

A)   Decrease in inventory.
B)   Increase in accounts payable.
C)   Decrease in ﬁxed assets.
D)   Decrease in equity.
E)   Increase in long-term debt.

Question 12

A ﬁrm has average inventory of $1,250,000, an inventory period of 58 days, a receivables period of 32 days, and average payables of $810,000. What is its cash cycle?

Accepted Answer

A)   48 days
B)   52 days
C)   58 days
D)   67 days
E)   74 days

Question 13

A ﬁrm needs to raise cash and at the same time reduce the level of its accounts receivable. This ﬁrm would likely beneﬁt most by _______________________.

Accepted Answer

A)   Obtaining an unsecured short-term loan.
B)   Applying for a committed line of credit.
C)   Assigning its receivables on a short-term loan.
D)   Factoring its receivables.
E)   Securing any short-term credit with a blanket inventory lien.

Question 14

Which one of the following will decrease the operating cycle?

Accepted Answer

A)   An easing of the accounts receivable collection policy.
B)   Additional inventories are kept on hand.
C)   The customer discount for early payment is discontinued.
D)   Suppliers offer a bonus discount for early payment.
E)   The inventory turnover changes from 9 to 10.

Question 15

A ___________ is an informal arrangement between a bank and a business that allows the ﬁrm to periodically borrow up to a pre-speciﬁed limit.

Accepted Answer

A)   Non-committed operating loan.
B)   Committed operating loan.
C)   Banker's acceptance.
D)   Long-term loan commitment.
E)   Field warehouse ﬁnancing arrangement.

Question 16

The length of time between the acquisition of inventory and payment for it is called the _____________.

Accepted Answer

A)   Operating cycle.
B)   Inventory period.
C)   Accounts receivable period.
D)   Accounts payable period.
E)   Cash cycle.

Question 17

Bandall Corporation estimates that for credit sales, 55% of cash is received in the month of sale; 35% in the month after the sale, and 13% second month after the sale. The remainder is never
Collected. Bandall had credit sales of $78,000 in April; $92,000 in May, and $115,000 in June. Given
The following information, determine the cash collections for June.

Accepted Answer

A)   $85,590
B)   $95,590
C)   $105,590
D)   $115,590
E)   $125,590

Question 18

The credit manager does not have a direct inﬂuence on the ﬁrm's accounts receivable balance.

Accepted Answer

A) True 
 B)False

Question 19

Year Average  Credit Sales = $180,000 COGS = $135,000
How many days are in the payables period?

Accepted Answer

A)   11 days
B)   20 days
C)   22 days
D)   25 days
E)   30 days

Question 20

The Deluxe Corporation has a 45 day accounts receivable period. The estimated quarterly sales for this year, starting with the ﬁrst quarter, are $1,700, $2,100, $3,500, and $2,500, respectively. What is
The accounts receivable balance at the beginning of the second quarter? Assume that a year has
360 days.

Accepted Answer

A)   $850
B)   $1,050
C)   $1,250
D)   $1,750
E)   $1,900

Exam 18: Short-Term Finance and Planning

Correct Answer
verified

Correct Answer
verified

Which one of the following is a use of cash?

Correct Answer
verified

Evans, Inc. has an inventory period of 36 days, an accounts payable period of 44 days, and an accounts receivable turnover rate of 20. What is the length of the cash cycle?

Correct Answer
verified

A ﬁrm needs to raise cash and at the same time reduce the level of its accounts receivable. This ﬁrm would likely beneﬁt most by _______________________.

Correct Answer
verified

A ___________ is an informal arrangement between a bank and a business that allows the ﬁrm to periodically borrow up to a pre-speciﬁed limit.

Correct Answer
verified

Mycale's has always paid its suppliers in 30 days. The company just hired a new ﬁnancial oﬃcer who is changing the policy such that suppliers will now be paid in 45 days. This change will The accounts payable period and _ the cash cycle.

Correct Answer
verified

Receivable factoring represents an increase in cash.

Correct Answer
verified

The credit manager does not have a direct inﬂuence on the ﬁrm's accounts receivable balance.

Correct Answer
verified

Provide a deﬁnition for the term cash budget.

Correct Answer
verified
A forecast of cash r...
View Answer

All else the same, shortening the ﬁrm's cash cycle will likely____________ the ﬁrm's proﬁtability.

Correct Answer
verified

The length of time between the acquisition of inventory and payment for it is called the _____________.

Correct Answer
verified

Which one of the following will decrease the operating cycle?

Correct Answer
verified

A ﬂexible short-term ﬁnancial policy:

Correct Answer
verified

Holly's Meat Markets has accumulated $128,900 in net working capital. Which one of the following will reduce this amount?

Correct Answer
verified

Correct Answer
verified

A ﬁrm has average inventory of $1,250,000, an inventory period of 58 days, a receivables period of 32 days, and average payables of $810,000. What is its cash cycle?

Correct Answer
verified

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the payables period?

Correct Answer
verified

A ﬂexible policy entails the use of marketable securities.

Correct Answer
verified

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the cash cycle?

Correct Answer
verified

Exam 18: Short-Term Finance and Planning

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is a use of cash?

Correct AnswerverifiedShow Answer

Evans, Inc. has an inventory period of 36 days, an accounts payable period of 44 days, and an accounts receivable turnover rate of 20. What is the length of the cash cycle?

Correct AnswerverifiedShow Answer

A ﬁrm needs to raise cash and at the same time reduce the level of its accounts receivable. This ﬁrm would likely beneﬁt most by _______________________.

Correct AnswerverifiedShow Answer

A ___________ is an informal arrangement between a bank and a business that allows the ﬁrm to periodically borrow up to a pre-speciﬁed limit.

Correct AnswerverifiedShow Answer

Mycale's has always paid its suppliers in 30 days. The company just hired a new ﬁnancial oﬃcer who is changing the policy such that suppliers will now be paid in 45 days. This change will ______ The accounts payable period and _______ the cash cycle.

Correct AnswerverifiedShow Answer

Receivable factoring represents an increase in cash.

Correct AnswerverifiedShow Answer

The credit manager does not have a direct inﬂuence on the ﬁrm's accounts receivable balance.

Correct AnswerverifiedShow Answer

Provide a deﬁnition for the term cash budget.

Correct AnswerverifiedA forecast of cash r...View AnswerShow Answer

All else the same, shortening the ﬁrm's cash cycle will likely____________ the ﬁrm's proﬁtability.

Correct AnswerverifiedShow Answer

The length of time between the acquisition of inventory and payment for it is called the _____________.

Correct AnswerverifiedShow Answer

Which one of the following will decrease the operating cycle?

Correct AnswerverifiedShow Answer

A ﬂexible short-term ﬁnancial policy:

Correct AnswerverifiedShow Answer

Holly's Meat Markets has accumulated $128,900 in net working capital. Which one of the following will reduce this amount?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A ﬁrm has average inventory of $1,250,000, an inventory period of 58 days, a receivables period of 32 days, and average payables of $810,000. What is its cash cycle?

Correct AnswerverifiedShow Answer

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the payables period?

Correct AnswerverifiedShow Answer

A ﬂexible policy entails the use of marketable securities.

Correct AnswerverifiedShow Answer

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the cash cycle?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Mycale's has always paid its suppliers in 30 days. The company just hired a new ﬁnancial oﬃcer who is changing the policy such that suppliers will now be paid in 45 days. This change will The accounts payable period and _ the cash cycle.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A forecast of cash r...
View 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