Question 1

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

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Question 2

List and describe the three basic types of secured inventory loans.Compare the advantages and disadvantages of these loans.

Accepted Answer

The three types are blanket lien,trust receipts,and field warehouse financing.The blanket lien is certainly the easiest for the firm since the lender places a lien on the firm's entire inventory.Generally,the borrower does not have to provide any details on the inventory items.Trust receipt financing requires the borrower and lender to specify the exact inventory item which secures each advance.This can be a time-consuming and cumbersome type of financing for the firm.Field warehouse financing requires that an independent company supervise the collateral for the lender.This,too,can be a cumbersome type of financing.

Question 3

Which of the following will increase the operating cycle?
I.increasing the inventory turnover rate
II.increasing the payables period
III.decreasing the receivable turnover rate
IV.decreasing the inventory level

Accepted Answer

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

Question 4

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?

Accepted Answer

A)   $151
B)   $170
C)   $176
D)   $189
E)   $193F) C) and E)
G) A) and B) B

Question 5

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.

Accepted Answer

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

Question 6

Which one of the following equals the operating cycle?

Accepted Answer

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

Question 7

A graphical representation of the operating and cash cycles is called a(n) :

Accepted Answer

A)   operating chart.
B)   cash flow time line.
C)   production flow line.
D)   component chart.
E)   working time line.F) A) and B)
G) A) and C)

Question 8

A company currently has a 51 day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2 days,increases its inventory period by 3 days,and increases its payables period by 4 days.What will the length of the cash cycle be after these changes?

Accepted Answer

A)   42 days
B)   45 days
C)   48 days
D)   49 days
E)   51 daysF) A) and B)
G) B) and E)

Question 9

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?

Accepted Answer

A)   $375
B)   $450
C)   $500
D)   $600
E)   $700F) A) and D)
G) A) and C)

Question 10

Which of the following will increase the cash cycle,all else constant?
I.increasing the inventory period
II.decreasing the accounts receivable turnover rate
III.increasing the accounts payable period
IV.decreasing the accounts receivable period

Accepted Answer

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

Question 11

West Chester Automation has an inventory turnover of 17.5 and an accounts payable turnover of 11.The accounts receivable period is 36 days.What is the length of the cash cycle?

Accepted Answer

A)   5.67 days
B)   23.68 days
C)   41.00 days
D)   52.00 days
E)   58.81 daysF) D) 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) A) and D)
G) None of the above

Question 13

An increase in which one of the following will decrease the cash cycle,all else equal?

Accepted Answer

A)   payables turnover
B)   days sales in inventory
C)   operating cycle
D)   inventory turnover rate
E)   accounts receivable periodF) B) and C)
G) All of the above

Question 14

A manufacturing firm has a 90-day collection period.The firm produces seasonal merchandise and thus has the least sales during the first quarter of a year and the highest level of sales during the fourth quarter of a year.The firm maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters.The firm is most apt to face a cash-out situation in:

Accepted Answer

A)   the first quarter.
B)   the second quarter.
C)   the third quarter.
D)   the fourth quarter.
E)   any quarter with equal probabilities of occurrence.F) A) and B)
G) B) and C)

Question 15

Which two of the following are most apt to cause a cash-out for a firm that is generally financially sound?
I.fixed expenses
II.fixed asset purchases
III.flexible financing policy
IV.highly seasonal sales

Accepted Answer

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

Question 16

The Blue Star has sales of $387,000,costs of goods sold of $259,000,average accounts receivable of $12,100,and average accounts payable of $12,600.How long does it take for the firm's credit customers to pay for their purchases?

Accepted Answer

A)   7.67 days
B)   9.24 days
C)   11.41 days
D)   11.88 days
E)   13.81 daysF) A) and B)
G) B) and E)

Question 17

The Athletic Sports Store has a beginning receivables balance on January 1 of $410.Sales for January through April are $440,$480,$690,and $720,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a year has 360 days.

Accepted Answer

A)   $410
B)   $440
C)   $480
D)   $690
E)   $720F) A) and C)
G) A) and B)

Question 18

Which one of the following increases cash?

Accepted Answer

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 supplierF) A) and E)
G) A) and B)

Question 19

The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:

Accepted Answer

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

Question 20

The Mish Mash Store has a beginning cash balance of $440 on March 1.The firm has projected sales of $610 in February,$680 in March,and $740 in April.The cost of goods sold is equal to 70 percent of sales.Goods are purchased one month prior to the month of sale.The accounts payable period is 30 days and the accounts receivable period is 10 days.The firm has monthly cash expenses of $125.What is the projected ending cash balance at the end of March? Assume every month has 30 days.

Accepted Answer

A)   $461
B)   $496
C)   $507
D)   $567
E)   $621F) A) and D)
G) A) and E)

Exam 18: Short-Term Finance and Planning

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
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Students should repl...
View Answer

List and describe the three basic types of secured inventory loans.Compare the advantages and disadvantages of these loans.

Which of the following will increase the operating cycle? I.increasing the inventory turnover rate II.increasing the payables period III.decreasing the receivable turnover rate IV.decreasing the inventory level

Correct Answer
verified

Correct Answer
verified
B

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.

Correct Answer
verified

Which one of the following equals the operating cycle?

Correct Answer
verified

A graphical representation of the operating and cash cycles is called a(n) :

Correct Answer
verified

A company currently has a 51 day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2 days,increases its inventory period by 3 days,and increases its payables period by 4 days.What will the length of the cash cycle be after these changes?

Correct Answer
verified

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?

Correct Answer
verified

Which of the following will increase the cash cycle,all else constant? I.increasing the inventory period II.decreasing the accounts receivable turnover rate III.increasing the accounts payable period IV.decreasing the accounts receivable period

Correct Answer
verified

West Chester Automation has an inventory turnover of 17.5 and an accounts payable turnover of 11.The accounts receivable period is 36 days.What is the length of the cash cycle?

Correct Answer
verified

Which one of the following will decrease the operating cycle?

Correct Answer
verified

An increase in which one of the following will decrease the cash cycle,all else equal?

Correct Answer
verified

Correct Answer
verified

Which two of the following are most apt to cause a cash-out for a firm that is generally financially sound? I.fixed expenses II.fixed asset purchases III.flexible financing policy IV.highly seasonal sales

Correct Answer
verified
B

The Blue Star has sales of $387,000,costs of goods sold of $259,000,average accounts receivable of $12,100,and average accounts payable of $12,600.How long does it take for the firm's credit customers to pay for their purchases?

Correct Answer
verified

The Athletic Sports Store has a beginning receivables balance on January 1 of $410.Sales for January through April are $440,$480,$690,and $720,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a year has 360 days.

Correct Answer
verified

Which one of the following increases cash?

Correct Answer
verified

The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:

Correct Answer
verified

Correct Answer
verified

Exam 18: Short-Term Finance and Planning

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

List and describe the three basic types of secured inventory loans.Compare the advantages and disadvantages of these loans.

Which of the following will increase the operating cycle? I.increasing the inventory turnover rate II.increasing the payables period III.decreasing the receivable turnover rate IV.decreasing the inventory level

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

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.

Correct AnswerverifiedShow Answer

Which one of the following equals the operating cycle?

Correct AnswerverifiedShow Answer

A graphical representation of the operating and cash cycles is called a(n) :

Correct AnswerverifiedShow Answer

A company currently has a 51 day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2 days,increases its inventory period by 3 days,and increases its payables period by 4 days.What will the length of the cash cycle be after these changes?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which of the following will increase the cash cycle,all else constant? I.increasing the inventory period II.decreasing the accounts receivable turnover rate III.increasing the accounts payable period IV.decreasing the accounts receivable period

Correct AnswerverifiedShow Answer

West Chester Automation has an inventory turnover of 17.5 and an accounts payable turnover of 11.The accounts receivable period is 36 days.What is the length of the cash cycle?

Correct AnswerverifiedShow Answer

Which one of the following will decrease the operating cycle?

Correct AnswerverifiedShow Answer

An increase in which one of the following will decrease the cash cycle,all else equal?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which two of the following are most apt to cause a cash-out for a firm that is generally financially sound? I.fixed expenses II.fixed asset purchases III.flexible financing policy IV.highly seasonal sales

Correct AnswerverifiedB

The Blue Star has sales of $387,000,costs of goods sold of $259,000,average accounts receivable of $12,100,and average accounts payable of $12,600.How long does it take for the firm's credit customers to pay for their purchases?

Correct AnswerverifiedShow Answer

The Athletic Sports Store has a beginning receivables balance on January 1 of $410.Sales for January through April are $440,$480,$690,and $720,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a year has 360 days.

Correct AnswerverifiedShow Answer

Which one of the following increases cash?

Correct AnswerverifiedShow Answer

The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
Students should repl...
View Answer

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B

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B

Correct Answer
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Correct Answer
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