Question 1

Which of the following are uses of cash?
I.collecting a receivable
II.increasing inventory
III.obtaining a bank loan
IV.paying a supplier for previous purchases

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I and II only
D)  I, II, and IV only
E)  II, III, and IV onlyF) None of the above
G) A) and E)

Question 2

Your firm has an inventory turnover rate of 14, a payables turnover rate of 8, and a receivables turnover rate of 19.How long is your firm's operating cycle?

Accepted Answer

A)  45.06 days
B)  45.28 days
C)  45.63 days
D)  53.13 days
E)  53.78 daysF) A) and B)
G) A) and C)

Question 3

Brustle's Pottery either factors or assigns all of its receivables to other firms.This is known as:

Accepted Answer

A)  accounts receivable financing.
B)  pledged financing.
C)  capital funding.
D)  daily funding.
E)  capital financing.F) A) and E)
G) A) and D)

Question 4

High Point Hotel (HPH)  has $165,000 in accounts receivable.To finance a major purchase, the company assigns these receivables to Cross Town Bank.Which one of the following statements correctly describes this transaction?

Accepted Answer

A)  HPH will immediately receive $165,000 and will have no further obligation related to these receivables.
B)  HPH will receive some amount of cash immediately while maintaining full responsibility for any uncollected receivables.
C)  Cross Town Bank accepts full responsibility for the collection of the accounts receivables and, in exchange, immediately pays HPH a discounted value for its receivables.
D)  Cross Town Bank accepts full responsibility for collecting the accounts receivables and pays HPH a discounted price for the accounts collected after the normal collection period has elapsed.
E)  HPH receives the full amount of its receivables upon assignment but must reimburse Cross Town Bank for any uncollected account.F) B) and E)
G) None of the above

Question 5

As of the beginning of the quarter, Swenson's, Inc.had a cash balance of $460.During the quarter, the company collected $480 from customers and paid suppliers $360.The company also paid an interest payment of $20 and a tax payment of $110.In addition, the company repaid $140 on its long-term debt.What is Callahan's cash balance at the end of the quarter?

Accepted Answer

A)  -$110
B)  $290
C)  $310
D)  $350
E)  $490F) A) and E)
G) A) and D)

Question 6

On average, Furniture & More is able to sell its inventory in 27 days.The firm takes 87 days on average to pay for its purchases.On the other hand, its average customer pays with a credit card which allows the firm to collect its receivables in 4 days.Given this information, what is the length of operating cycle?

Accepted Answer

A)  31 days
B)  38 days
C)  45 days
D)  56 days
E)  62 daysF) A) and D)
G) C) and D)

Question 7

The length of time that elapses between the day a firm purchases an inventory item and the day that item sells is called the:

Accepted Answer

A)  operating cycle.
B)  inventory period.
C)  accounts receivable period.
D)  accounts payable period.
E)  cash cyclE.F) All of the above
G) C) and D)

Question 8

The Dog House expects sales of $560, $650, $630, and $610 for the months of May through August, respectively.The firm collects 20 percent of sales in the month of sale, 70 percent in the month following the month of sale, and 8 percent in the second month following the month of sale.The remaining 2 percent of sales is never collected.How much money does the firm expect to collect in the month of August?

Accepted Answer

A)  $615
B)  $628
C)  $633
D)  $639
E)  $643F) B) and E)
G) None of the above

Question 9

Breakwater Aquatics has a 45 day accounts receivable period.The estimated quarterly sales for this year, starting with the first quarter, are $6,800, $7,100, $8,200, and $6,400, respectively.What is the accounts receivable balance at the beginning of the third quarter? Assume a year has 360 days.

Accepted Answer

A)  $3,400
B)  $3,550
C)  $6,950
D)  $7,100
E)  $7,650F) None of the above
G) A) and C)

Question 10

Which of the following are benefits derived from short-term financial planning?
I.having advance notice of when your firm will require external financing
II.being able to determine the extent of time for which a loan is required
III.having the ability to time capital expenditures in order to place the least financial burden possible on a firm
IV.knowing for certain what your cash balance will be six months in advance

Accepted Answer

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

Question 11

Your firm has an average collection period of 42 days.Current practice is to factor all receivables immediately at a 4 percent discount.Assume that default is extremely unlikely.What is the effective cost of borrowing?

Accepted Answer

A)  28.79 percent
B)  36.20 percent
C)  37.78 percent
D)  40.97 percent
E)  42.58 percentF) B) and E)
G) A) and D)

Question 12

Which one of the following will decrease the operating cycle?

Accepted Answer

A)  decreasing the inventory turnover rate
B)  decreasing the accounts payable period
C)  increasing the accounts receivable turnover rate
D)  increasing the accounts payable period
E)  increasing the accounts receivable periodF) B) and E)
G) A) and E)

Question 13

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

Accepted Answer

A)  selling inventory at cost
B)  collecting payment from a customer
C)  paying a payment on a long-term debt
D)  selling a fixed asset for book value
E)  paying a supplier for the purchase of an inventory itemF) C) and E)
G) A) and D)

Question 14

The optimal investment in current assets for an operating firm occurs at the point where:

Accepted Answer

A)  both shortage costs and carrying costs equal zero.
B)  shortage costs are equal to zero.
C)  carrying costs are equal to zero.
D)  carrying costs exceed shortage costs.
E)  the total costs of holding current assets is minimized.F) A) and E)
G) None of the above

Question 15

Costs that increase as a firm acquires additional current assets are called _____ costs.

Accepted Answer

A)  carrying
B)  shortage
C)  order
D)  safety
E)  tradingF) B) and C)
G) A) and E)

Question 16

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) None of the above
G) C) and E)

Question 17

Using two separate graphs, illustrate a flexible and a restrictive short-term financing policy.Place costs on the vertical axis and current assets on the horizontal axis.On each graph, indicate the shortage costs, carrying costs, total costs, and indicate the optimal investment in current assets.

Accepted Answer

Students should repl...

Question 18

Which of the following determines the length of the operating cycle?
I.cash cycle
II.inventory period
III.accounts payable period
IV.accounts receivable period

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and IV only
D)  II, III, and IV only
E)  I, II, III, and IVF) B) and E)
G) All of the above

Question 19

Details Corp.has a book net worth of $8,150.Long-term debt is $1,800.Net working capital, other than cash, is $2,150.Fixed assets are $2,000.How much cash does the company have?

Accepted Answer

A)  $4,250
B)  $4,550
C)  $5,150
D)  $5,800
E)  $6,750F) B) and E)
G) None of the above

Question 20

Peterson's Antiquities currently has a 31 day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2 days, decreases its inventory period by 3 days, and decreases its payables period by 4 days.What will the length of the cash cycle be after these changes?

Accepted Answer

A)  22 days
B)  23 days
C)  29 days
D)  30 days
E)  31 daysF) A) and B)
G) A) and D)

Exam 18: International Corporate Finance

Which of the following determines the length of the operating cycle? I.cash cycle II.inventory period III.accounts payable period IV.accounts receivable period

Correct Answer
verified

Brustle's Pottery either factors or assigns all of its receivables to other firms.This is known as:

Correct Answer
verified

Details Corp.has a book net worth of $8,150.Long-term debt is $1,800.Net working capital, other than cash, is $2,150.Fixed assets are $2,000.How much cash does the company have?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Breakwater Aquatics has a 45 day accounts receivable period.The estimated quarterly sales for this year, starting with the first quarter, are $6,800, $7,100, $8,200, and $6,400, respectively.What is the accounts receivable balance at the beginning of the third quarter? Assume a year has 360 days.

Correct Answer
verified

Your firm has an average collection period of 42 days.Current practice is to factor all receivables immediately at a 4 percent discount.Assume that default is extremely unlikely.What is the effective cost of borrowing?

Correct Answer
verified

High Point Hotel (HPH) has $165,000 in accounts receivable.To finance a major purchase, the company assigns these receivables to Cross Town Bank.Which one of the following statements correctly describes this transaction?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Costs that increase as a firm acquires additional current assets are called _____ costs.

Correct Answer
verified

Correct Answer
verified

The length of time that elapses between the day a firm purchases an inventory item and the day that item sells is called the:

Correct Answer
verified

The optimal investment in current assets for an operating firm occurs at the point where:

Correct Answer
verified

Using two separate graphs, illustrate a flexible and a restrictive short-term financing policy.Place costs on the vertical axis and current assets on the horizontal axis.On each graph, indicate the shortage costs, carrying costs, total costs, and indicate the optimal investment in current assets.

Correct Answer
verified
Students should repl...
View Answer

Which of the following are uses of cash? I.collecting a receivable II.increasing inventory III.obtaining a bank loan IV.paying a supplier for previous purchases

Correct Answer
verified

Which one of the following will decrease the operating cycle?

Correct Answer
verified

Correct Answer
verified

Your firm has an inventory turnover rate of 14, a payables turnover rate of 8, and a receivables turnover rate of 19.How long is your firm's operating cycle?

Correct Answer
verified

Correct Answer
verified

Exam 18: International Corporate Finance

Which of the following determines the length of the operating cycle? I.cash cycle II.inventory period III.accounts payable period IV.accounts receivable period

Correct AnswerverifiedShow Answer

Brustle's Pottery either factors or assigns all of its receivables to other firms.This is known as:

Correct AnswerverifiedShow Answer

Details Corp.has a book net worth of $8,150.Long-term debt is $1,800.Net working capital, other than cash, is $2,150.Fixed assets are $2,000.How much cash does the company have?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Breakwater Aquatics has a 45 day accounts receivable period.The estimated quarterly sales for this year, starting with the first quarter, are $6,800, $7,100, $8,200, and $6,400, respectively.What is the accounts receivable balance at the beginning of the third quarter? Assume a year has 360 days.

Correct AnswerverifiedShow Answer

Your firm has an average collection period of 42 days.Current practice is to factor all receivables immediately at a 4 percent discount.Assume that default is extremely unlikely.What is the effective cost of borrowing?

Correct AnswerverifiedShow Answer

High Point Hotel (HPH) has $165,000 in accounts receivable.To finance a major purchase, the company assigns these receivables to Cross Town Bank.Which one of the following statements correctly describes this transaction?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Costs that increase as a firm acquires additional current assets are called _____ costs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The length of time that elapses between the day a firm purchases an inventory item and the day that item sells is called the:

Correct AnswerverifiedShow Answer

The optimal investment in current assets for an operating firm occurs at the point where:

Correct AnswerverifiedShow Answer

Using two separate graphs, illustrate a flexible and a restrictive short-term financing policy.Place costs on the vertical axis and current assets on the horizontal axis.On each graph, indicate the shortage costs, carrying costs, total costs, and indicate the optimal investment in current assets.

Correct AnswerverifiedStudents should repl...View AnswerShow Answer

Which of the following are uses of cash? I.collecting a receivable II.increasing inventory III.obtaining a bank loan IV.paying a supplier for previous purchases

Correct AnswerverifiedShow Answer

Which one of the following will decrease the operating cycle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Your firm has an inventory turnover rate of 14, a payables turnover rate of 8, and a receivables turnover rate of 19.How long is your firm's operating cycle?

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Students should repl...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified