Question 1

Which one of the following is the length of time that a retailer owes its supplier for an inventory purchase?

Accepted Answer

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

Question 2

Which of the following costs tend to rise when a firm switches from a restrictive financial policy to a flexible financial policy?
I.restocking costs
II.lower prices to offset limited selection
III.storage costs
IV.current-asset opportunity costs

Accepted Answer

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

Question 3

Which one of the following defines the cash cycle?

Accepted Answer

A)  operating cycle minus the inventory period
B)  operating cycle minus the accounts receivable period
C)  inventory period plus the accounts receivable period
D)  operating cycle minus the accounts payable period
E)  inventory period plus the accounts payable periodF) B) and D)
G) C) and E)

Question 4

Which one of the following activities is a source of cash?

Accepted Answer

A)  decreasing accounts receivable
B)  decreasing long-term debt
C)  repurchasing shares of stock
D)  increasing fixed assets
E)  increasing inventoryF) B) and D)
G) B) and E)

Question 5

The Moose Co.currently has 81 days in its cash cycle and 136 days in its operating cycle.The firm purchases all of its inventory from one supplier.This supplier has offered a 5 per cent discount to The Moose Co.if it will pay for its purchases within 10 days.If The Moose Co.changes it payables policy and pays in 10 days,the firm's cash cycle will be _____ days.

Accepted Answer

A)  91
B)  131
C)  114
D)  126
E)  103F) None of the above
G) A) and E)

Question 6

Which one of the following statements is true,all else constant?

Accepted Answer

A)  An increase in the inventory turnover rate will decrease the cash cycle.
B)  Paying a supplier within the discount period,rather than waiting until the end of the normal credit period,decreases the cash cycle.
C)  The cash cycle can never be negative.
D)  A decrease in the accounts receivable turnover rate decreases the cash cycle.
E)  The payables period must be shorter than the receivables period.F) A) and E)
G) C) and D)

Question 7

At the end of June 2007,TB Cave & Associates had an average of $45 000 in accounts receivable.Credit sales were $292 500.The company factors all of its receivables immediately at a 1.50% discount.For simplification,consider that all of the accounts receivable are expected to be collected in full.What is the company's effective cost of borrowing on this source of financing?

Accepted Answer

A)  13.48%
B)  11.34%
C)  12.56%
D)  12.01%
E)  10.32%F) A) and B)
G) A) and C)

Question 8

Generally speaking,which of the following situations will occur if a seasonal company adopts a compromise financial policy?
I.periods where short-term financing is required
II less long-term debt than if the firm followed a restrictive financial policy
III.periods of excess funds which can be invested in short-term marketable securities
IV.lower investment in fixed assets than if the firm adopted a flexible financial policy

Accepted Answer

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

Question 9

The amount of time that a firm holds inventory in stock is referred to as which one of the following?

Accepted Answer

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

Question 10

Factoring involves the lender buying the accounts receivable assets of the borrowing company at a discount to their face value.If the factoring company can recover future bad debt from the borrowing company,this is called:

Accepted Answer

A)  a disintermediated type of factoring
B)  conventional factoring
C)  assignment of receivables
D)  factoring on a notification basis
E)  unconventional factoringF) C) and D)
G) B) and E)

Question 11

Carter United has annual sales of $509 000 and cost of goods sold of $267 000.The profit margin is 4 per cent and the accounts payable period is 32 days.What is the average accounts payable balance?

Accepted Answer

A)  $23 408.22
B)  $33 617.17
C)  $27 001.01
D)  $44 624.66
E)  $18 887.16F) A) and E)
G) A) and B)

Question 12

The cash cycle is equal to:

Accepted Answer

A)  the operating cycle minus the accounts receivable period
B)  the inventory period minus the accounts payable period
C)  the accounts receivable period minus the accounts payable period plus the inventory period
D)  the inventory period minus the accounts receivable period minus the accounts payable period
E)  the operating cycle plus the accounts payable periodF) A) and B)
G) A) and C)

Question 13

Short-term uncommitted loan facilities are often used to finance temporary needs,such as:

Accepted Answer

A)  all of the given answers
B)  none of the given answers
C)  paying trade creditors to earn any trade discounts
D)  one-off transactions
E)  meeting salary payments when the collection of trade receivables is slowF) B) and C)
G) A) and E)

Question 14

Black Water Mills is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Accepted Answer

A)  carrying costs are equal to zero
B)  both carrying costs and shortage costs are at their minimum levels
C)  carrying costs exceed shortage costs
D)  shortage costs are equal to zero
E)  shortage costs equal carrying costsF) None of the above
G) A) and B)

Question 15

The operating cycle commences when:

Accepted Answer

A)  inventory is purchased
B)  a sale is made
C)  a receivable is created
D)  payment is made for inventory purchased on credit
E)  an accounts payable is paidF) B) and E)
G) B) and C)

Question 16

Which one of the following statements is correct concerning the accounts payable period?

Accepted Answer

A)  managers generally prefer a shorter accounts payable period than a longer one
B)  extending the accounts payable period effectively decreases the cash needs of a firm
C)  increasing the accounts payable turnover rate increases the accounts payable period
D)  an increase in the accounts payable period will increase the operating cycle,all else equal
E)  the accounts payable period is equal to the cost of goods sold divided by the average accounts payableF) A) and D)
G) A) and B)

Question 17

Which of the following are considered to be shortage costs?
I.the cost of placing an order
II.production disruptions caused by the inventory
III.lost sales due to limited selection
IV.opportunity cost associated with highly liquid assets

Accepted Answer

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

Question 18

The accounts receivable period is the time that elapses between the _____ and the _____.

Accepted Answer

A)  sale of inventory;payment to supplier
B)  sale of inventory;billing to customer
C)  sale of inventory;collection of the receivable
D)  purchase of inventory;payment to the supplier
E)  purchase of inventory;collection of the receivableF) A) and B)
G) None of the above

Question 19

By definition,an inventory loan is which one of the following types of loan?

Accepted Answer

A)  unsecured long-term loan
B)  secured long-term loan
C)  trust receipt loan
D)  secured short-term loan
E)  unsecured short-term loanF) A) and E)
G) A) and C)

Question 20

Which one of the following will increase the operating cycle?

Accepted Answer

A)  decreasing the days' sales in inventory
B)  decreasing the accounts payable turnover rate
C)  decreasing the inventory turnover rate
D)  decreasing the accounts payable period
E)  increasing the accounts receivable turnover rateF) D) and E)
G) A) and E)

Exam 16: Short-Term Financial Planning

By definition,an inventory loan is which one of the following types of loan?

Correct Answer
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The cash cycle is equal to:

Correct Answer
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Which one of the following statements is true,all else constant?

Correct Answer
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Which one of the following will increase the operating cycle?

Correct Answer
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Carter United has annual sales of $509 000 and cost of goods sold of $267 000.The profit margin is 4 per cent and the accounts payable period is 32 days.What is the average accounts payable balance?

Correct Answer
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Short-term uncommitted loan facilities are often used to finance temporary needs,such as:

Correct Answer
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The amount of time that a firm holds inventory in stock is referred to as which one of the following?

Correct Answer
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Which one of the following defines the cash cycle?

Correct Answer
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Which one of the following activities is a source of cash?

Correct Answer
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The operating cycle commences when:

Correct Answer
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Which one of the following statements is correct concerning the accounts payable period?

Correct Answer
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Which one of the following is the length of time that a retailer owes its supplier for an inventory purchase?

Correct Answer
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The accounts receivable period is the time that elapses between the _ and the _.

Correct Answer
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Which of the following costs tend to rise when a firm switches from a restrictive financial policy to a flexible financial policy? I.restocking costs II.lower prices to offset limited selection III.storage costs IV.current-asset opportunity costs

Correct Answer
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Which of the following are considered to be shortage costs? I.the cost of placing an order II.production disruptions caused by the inventory III.lost sales due to limited selection IV.opportunity cost associated with highly liquid assets

Correct Answer
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Factoring involves the lender buying the accounts receivable assets of the borrowing company at a discount to their face value.If the factoring company can recover future bad debt from the borrowing company,this is called:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Black Water Mills is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Correct Answer
verified

Exam 16: Short-Term Financial Planning

By definition,an inventory loan is which one of the following types of loan?

Correct AnswerverifiedShow Answer

The cash cycle is equal to:

Correct AnswerverifiedShow Answer

Which one of the following statements is true,all else constant?

Correct AnswerverifiedShow Answer

Which one of the following will increase the operating cycle?

Correct AnswerverifiedShow Answer

Carter United has annual sales of $509 000 and cost of goods sold of $267 000.The profit margin is 4 per cent and the accounts payable period is 32 days.What is the average accounts payable balance?

Correct AnswerverifiedShow Answer

Short-term uncommitted loan facilities are often used to finance temporary needs,such as:

Correct AnswerverifiedShow Answer

The amount of time that a firm holds inventory in stock is referred to as which one of the following?

Correct AnswerverifiedShow Answer

Which one of the following defines the cash cycle?

Correct AnswerverifiedShow Answer

Which one of the following activities is a source of cash?

Correct AnswerverifiedShow Answer

The operating cycle commences when:

Correct AnswerverifiedShow Answer

Which one of the following statements is correct concerning the accounts payable period?

Correct AnswerverifiedShow Answer

Which one of the following is the length of time that a retailer owes its supplier for an inventory purchase?

Correct AnswerverifiedShow Answer

The accounts receivable period is the time that elapses between the _____ and the _____.

Correct AnswerverifiedShow Answer

Which of the following costs tend to rise when a firm switches from a restrictive financial policy to a flexible financial policy? I.restocking costs II.lower prices to offset limited selection III.storage costs IV.current-asset opportunity costs

Correct AnswerverifiedShow Answer

Which of the following are considered to be shortage costs? I.the cost of placing an order II.production disruptions caused by the inventory III.lost sales due to limited selection IV.opportunity cost associated with highly liquid assets

Correct AnswerverifiedShow Answer

Factoring involves the lender buying the accounts receivable assets of the borrowing company at a discount to their face value.If the factoring company can recover future bad debt from the borrowing company,this is called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Black Water Mills is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Correct AnswerverifiedShow Answer

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The accounts receivable period is the time that elapses between the _ and the _.

Correct Answer
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