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Exam 18: International Corporate Finance

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Question 21

Multiple Choice

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Forest Gardens, Inc., has a beginning receivables balance on February 1 of $730.Sales for February through May are $720, $780, $820, and $850, respectively.The accounts receivable period is 30 days.What is the amount of the April collections? Assume a year has 360 days.

A) $720
B) $780
C) $790
D) $820
E) $850

F) A) and D)
G) B) and C)

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Question 22

Multiple Choice

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Which one of the following increases cash?

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 supplier

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

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Question 23

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Tall Guys Clothing has a 45 day collection period.Sales for the next calendar year are estimated at $2,100, $1,600, $2,500 and $2,300, respectively, by quarter, starting with the first quarter of the year.Given this information, which one of the following statements is correct? Assume a year has 360 days.

Which one of the following statements is correct?

Money deposited by a borrower with the bank in a low or non-interest-bearing account as a condition of a loan agreement is called a:

Here are some important figures from the budget of Nashville Nougats, Inc., for the second quarter of 2012: The company predicts that 3 percent of its credit sales will never be collected, 36 percent of its sales will be collected in the month of sale, and the remaining 61 percent will be collected in the following month.Credit purchases will be paid in the month following the purchase. In March 2012, credit sales were $302,400, and credit purchases were $224,640.The April 1 cash balance was $403,200.What is the cash balance at the end of May?

Metal Products Co.has an inventory period of 53 days, an accounts payable period of 68 days, and an accounts receivable turnover rate of 18.What is the length of the cash cycle?

Which one of the following will increase net working capital? Assume the current ratio is greater than 1.0.

Which of the following statements is (are) correct? I.An increase in the accounts payable period shortens the cash cycle. II.The cash cycle is equal to the operating cycle minus the inventory period. III.A negative cash cycle is preferable to a positive cash cycle. IV.The cash cycle plus the accounts receivable period is equal to the operating cycle.

A flexible short-term financial policy: I.increases shortage costs due to frequent cash-outs. II.tends to increase sales as compared to a restrictive policy. III.requires a sizeable investment in current assets. IV.incurs more carrying costs than a restrictive policy.

Denver Interiors, Inc., has sales of $836,000 and cost of goods sold of $601,000.The firm had a beginning inventory of $36,000 and an ending inventory of $47,000.What is the length of the inventory period?

Davis and Davis have expected sales of $490, $465, $450, and $570 for the months of January through April, respectively.The accounts receivable period is 28 days.What is the accounts receivable balance at the end of March? Assume a year has 360 days.

Which one of the following statements is correct concerning the cash balance of a firm?

Central Supply purchased a toboggan for inventory this morning and paid cash for it.The time period between today and the day Central Supply will receive cash from the sale of this toboggan is called the:

At the beginning of the year, you have an outstanding short-term loan of $274 which was used to cover your cash needs for the previous year.The interest expense for the year is $19.The projected net cash flow for this year is $123, prior to any payment of principal or interest on this loan.What is your anticipated loan balance at year end?

Which of the following actions will tend to decrease the inventory period? I.discontinuing all slow-selling merchandise II.selling obsolete inventory below cost just to get rid of it III.buying raw materials only as needed for the manufacturing process IV.producing goods on demand versus for inventory

The operating cycle describes how a product:

The Wake-Up Coffee Company has projected the following quarterly sales amounts for the coming year: Accounts receivable at the beginning of the year are $200.Wake-Up has a 60-day collection period.What is the amount of the accounts receivable balance at the end of Quarter 3?

North Side Wholesalers has sales of $948,000.The cost of goods sold is equal to 68 percent of sales.The firm has an average inventory of $23,000.How many days on average does it take the firm to sell its inventory?

A national firm has sales of $729,000 and cost of goods sold of $478,000.At the beginning of the year, the inventory was $37,000.At the end of the year, the inventory balance was $41,000.What is the inventory turnover rate?