Question 1

Which one of the following would be the most common evidence of indebtedness when a sale is made on open account?

Accepted Answer

A)  Sight draft
B)  Commercial draft
C)  Banker's acceptance
D)  Promissory note
E)  InvoiceF) C) and D)
G) B) and C)

Question 2

Rock Bottom Carpets sells 5,600 carpets a year at an average price per carpet of $1,490.The carrying cost per unit is $22.37.The company orders 500 carpets at a time and has a fixed order cost of $69 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Accepted Answer

A)  147 carpets
B)  166 carpets
C)  186 carpets
D)  315 carpets
E)  372 carpetsF) B) and C)
G) D) and E)

Question 3

What is the key difference between an ordinary preferred stock and a money market preferred stock?

Accepted Answer

A)  Issuer
B)  Maturity
C)  Fixed versus floating dividend
D)  Voting rights
E)  Absence of any dividendF) None of the above
G) A) and B)

Question 4

Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?

Accepted Answer

A)  Accounts receivable aging
B)  Economic credit function
C)  Optimal credit curve
D)  Credit analysis
E)  Credit cost curveF) A) and D)
G) B) and C)

Question 5

The Flowering Vine buys hanging plants for $2 each and resells them for $8.95 each.The firm sells 3,500 plants per year.Generally,the firm orders 400 plants at a time and has a fixed cost per order of $28.The carrying cost per unit is $1.16.To avoid newer plants mixing with older plants,the inventory is totally sold out before it is restocked.The total annual carrying cost is ____ and the total annual restocking cost is ____.

Accepted Answer

A)  $211; $245
B)  $211; $269
C)  $232; $245
D)  $232; $256
E)  $232; $269F) A) and E)
G) A) and D)

Question 6

Rocket City Space Camp has annual credit sales of $16 million.The average collection period is 35 days.What is the average investment in accounts receivable as shown on the balance sheet?

Accepted Answer

A)  $646,000
B)  $824,000
C)  $1,408,888
D)  $1,534,247
E)  $1,693,134F) A) and B)
G) All of the above

Question 7

Kate's Korner Market monitors 3 percent of its inventory on a daily basis,another 20 percent on a weekly basis,and the remaining inventory on a quarterly basis.What inventory management approach is being used?

Accepted Answer

A)  ABC
B)  EOQ
C)  MRP
D)  Q*
E)  JITF) A) and B)
G) C) and D)

Question 8

Baxter's,Inc.generally holds $125,000 in cash in case an unexpected investment opportunity arises.Which one of the following refers to holding cash for this type of purpose?

Accepted Answer

A)  Precautionary motive
B)  Opportunistic motive
C)  Speculative motive
D)  Reserve motive
E)  Transaction motiveF) A) and E)
G) All of the above

Question 9

Harvest generally receives three checks a month in the amounts of $46,500,$32,000,and $63,800.On average,it takes two days for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float?

Accepted Answer

A)  $4,743
B)  $9,487
C)  $14,209
D)  $21,506
E)  $56,750F) B) and D)
G) B) and C)

Question 10

Kay's House of Sound sells 520 musical instruments a year at an average price per instrument of $580.All sales are credit sales with terms of 2/10,net 25.Hogan's has found that 78 percent of its customers take advantage of the discounted price.What is the amount of the firm's average accounts receivable?

Accepted Answer

A)  $9,560
B)  $10,990
C)  $11,280
D)  $12,440
E)  $12,620F) A) and D)
G) All of the above

Question 11

For which one of the following instruments does a bank guarantee payment by the buyer?

Accepted Answer

A)  Money market preferred stock
B)  Commercial paper
C)  Banker's acceptance
D)  Invoice
E)  Time draftF) A) and E)
G) All of the above

Question 12

Which one of the following best defines the term collection policy?

Accepted Answer

A)  Process of determining which customers will be granted credit
B)  Process of determining the probability that customers will not pay
C)  Set of guidelines used by a firm to determine the cost of offering credit to its customers
D)  Daily process of handling cash inflows and outflows of cash
E)  Set of procedures a firm follows in collecting accounts receivableF) B) and D)
G) C) and E)

Question 13

Which one of the following is a primary benefit of implementing zero-balance accounts into a cash management system?

Accepted Answer

A)  Increased disbursements float
B)  Total elimination of all safety stocks
C)  Additional cash availability
D)  Decreased collection float
E)  Elimination of all floatF) B) and E)
G) B) and D)

Question 14

As of Monday morning,the ledger balance and the available balance for a firm was $3,600.During the day,the firm wrote three checks in the amounts of $230,$590,and $870.The firm deposited a check for $350 and a check for $920.What is the amount of the collection float as of the end of the day?

Accepted Answer

A)  $420
B)  $580
C)  $840
D)  $1,270
E)  $1,690F) A) and D)
G) B) and D)

Question 15

Which one of the following best illustrates the concept of derived demand?

Accepted Answer

A)  A minimum wage worker tends to buy more off-brand products than do more highly paid professionals.
B)  A windshield company has to step up production because auto sales are increasing.
C)  A grocery store is selling more fresh fruits and vegetables because people are improving their diets.
D)  Restaurant sales are rising because unemployment is falling.
E)  Retail stores have higher sales around the holiday season than in other seasons of the year.F) A) and B)
G) B) and C)

Question 16

Explain the basic structure and workings of a disbursement system that utilizes zero-balance accounts.

Accepted Answer

The purpose of a zero-balance account is...

Question 17

Ruby Falls has an average collection period of 35 days.Its average daily investment in receivables is $71,000.What are annual credit sales?

Accepted Answer

A)  $727,272
B)  $740,429
C)  $914,414
D)  $1,450,200
E)  $1,707,500F) B) and D)
G) C) and E)

Question 18

Which one of the following is an expected result of the Check Clearing Act for the 21st Century?

Accepted Answer

A)  Firms will have to wait three days before having access to their deposited funds.
B)  Zero-balance accounts will be eliminated.
C)  Lockboxes will be prohibited.
D)  Collection float, but not disbursement float, will be reduced.
E)  Both collection and disbursement float will be reduced.F) C) and D)
G) A) and B)

Question 19

You purchased an item costing $5,900 on April 15.The terms of sale were 1/5,net 20.What is the last day you can pay the discounted price?

Accepted Answer

A)  April 20
B)  April 22
C)  April 28
D)  May 2
E)  May 5F) A) and C)
G) C) and D)

Question 20

What is the name given to a subsidiary of a firm that exists solely to handle the credit functions of the parent company?

Accepted Answer

A)  Internal credit organization
B)  Bank
C)  Credit association
D)  Captive finance company
E)  Credit unionF) A) and B)
G) None of the above

Exam 17: Working Capital Management

What is the key difference between an ordinary preferred stock and a money market preferred stock?

Correct Answer
verified

Which one of the following best illustrates the concept of derived demand?

Correct Answer
verified

Correct Answer
verified

As of Monday morning,the ledger balance and the available balance for a firm was $3,600.During the day,the firm wrote three checks in the amounts of $230,$590,and $870.The firm deposited a check for $350 and a check for $920.What is the amount of the collection float as of the end of the day?

Correct Answer
verified

What is the name given to a subsidiary of a firm that exists solely to handle the credit functions of the parent company?

Correct Answer
verified

Correct Answer
verified

Which one of the following is an expected result of the Check Clearing Act for the 21^st Century?

Correct Answer
verified

Harvest generally receives three checks a month in the amounts of $46,500,$32,000,and $63,800.On average,it takes two days for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float?

Correct Answer
verified

Kate's Korner Market monitors 3 percent of its inventory on a daily basis,another 20 percent on a weekly basis,and the remaining inventory on a quarterly basis.What inventory management approach is being used?

Correct Answer
verified

Ruby Falls has an average collection period of 35 days.Its average daily investment in receivables is $71,000.What are annual credit sales?

Correct Answer
verified

Rock Bottom Carpets sells 5,600 carpets a year at an average price per carpet of $1,490.The carrying cost per unit is $22.37.The company orders 500 carpets at a time and has a fixed order cost of $69 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Correct Answer
verified

Baxter's,Inc.generally holds $125,000 in cash in case an unexpected investment opportunity arises.Which one of the following refers to holding cash for this type of purpose?

Correct Answer
verified

Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?

Correct Answer
verified

Which one of the following would be the most common evidence of indebtedness when a sale is made on open account?

Correct Answer
verified

For which one of the following instruments does a bank guarantee payment by the buyer?

Correct Answer
verified

You purchased an item costing $5,900 on April 15.The terms of sale were 1/5,net 20.What is the last day you can pay the discounted price?

Correct Answer
verified

Explain the basic structure and workings of a disbursement system that utilizes zero-balance accounts.

Correct Answer
verified
The purpose of a zero-balance account is...
View Answer

Rocket City Space Camp has annual credit sales of $16 million.The average collection period is 35 days.What is the average investment in accounts receivable as shown on the balance sheet?

Correct Answer
verified

Which one of the following best defines the term collection policy?

Correct Answer
verified

Which one of the following is a primary benefit of implementing zero-balance accounts into a cash management system?

Correct Answer
verified

Exam 17: Working Capital Management

What is the key difference between an ordinary preferred stock and a money market preferred stock?

Correct AnswerverifiedShow Answer

Which one of the following best illustrates the concept of derived demand?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As of Monday morning,the ledger balance and the available balance for a firm was $3,600.During the day,the firm wrote three checks in the amounts of $230,$590,and $870.The firm deposited a check for $350 and a check for $920.What is the amount of the collection float as of the end of the day?

Correct AnswerverifiedShow Answer

What is the name given to a subsidiary of a firm that exists solely to handle the credit functions of the parent company?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is an expected result of the Check Clearing Act for the 21st Century?

Correct AnswerverifiedShow Answer

Harvest generally receives three checks a month in the amounts of $46,500,$32,000,and $63,800.On average,it takes two days for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float?

Correct AnswerverifiedShow Answer

Kate's Korner Market monitors 3 percent of its inventory on a daily basis,another 20 percent on a weekly basis,and the remaining inventory on a quarterly basis.What inventory management approach is being used?

Correct AnswerverifiedShow Answer

Ruby Falls has an average collection period of 35 days.Its average daily investment in receivables is $71,000.What are annual credit sales?

Correct AnswerverifiedShow Answer

Rock Bottom Carpets sells 5,600 carpets a year at an average price per carpet of $1,490.The carrying cost per unit is $22.37.The company orders 500 carpets at a time and has a fixed order cost of $69 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Correct AnswerverifiedShow Answer

Baxter's,Inc.generally holds $125,000 in cash in case an unexpected investment opportunity arises.Which one of the following refers to holding cash for this type of purpose?

Correct AnswerverifiedShow Answer

Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?

Correct AnswerverifiedShow Answer

Which one of the following would be the most common evidence of indebtedness when a sale is made on open account?

Correct AnswerverifiedShow Answer

For which one of the following instruments does a bank guarantee payment by the buyer?

Correct AnswerverifiedShow Answer

You purchased an item costing $5,900 on April 15.The terms of sale were 1/5,net 20.What is the last day you can pay the discounted price?

Correct AnswerverifiedShow Answer

Explain the basic structure and workings of a disbursement system that utilizes zero-balance accounts.

Correct AnswerverifiedThe purpose of a zero-balance account is...View AnswerShow Answer

Rocket City Space Camp has annual credit sales of $16 million.The average collection period is 35 days.What is the average investment in accounts receivable as shown on the balance sheet?

Correct AnswerverifiedShow Answer

Which one of the following best defines the term collection policy?

Correct AnswerverifiedShow Answer

Which one of the following is a primary benefit of implementing zero-balance accounts into a cash management system?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which one of the following is an expected result of the Check Clearing Act for the 21^st Century?

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
The purpose of a zero-balance account is...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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