Question 1

Your firm has an average collection period of 51 days. Current practice is to factor all receivables immediately at a 2.2 percent discount. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.

Accepted Answer

A)   17.12 percent
B)   17.18 percent
C)   17.26 percent
D)   17.53 percent
E)   17.59 percentF) A) and E)
G) D) and E)

Question 2

A firm has an average collection period of 35 days and factors all of its receivables immediately at a 0.95 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?

Accepted Answer

A)   9.98 percent
B)   10.13 percent
C)   10.24 percent
D)   10.38 percent
E)   10.47 percentF) A) and B)
G) C) and D)

Question 3

Al's Meat Market has annual sales of $523,000 and cost of goods sold of $358,000. The profit margin is 4.2 percent and the accounts payable period is 38 days. What is the average accounts payable balance?

Accepted Answer

A)   $9,421
B)   $13,763
C)   $37,271
D)   $48,211
E)   $54,449F) B) and C)
G) All of the above

Question 4

Which one of the following is a use of cash?

Accepted Answer

A)   Selling inventory at cost
B)   Paying a supplier for inventory you purchased last month
C)   Borrowing money from a local bank
D)   Collecting payment from a customer
E)   Selling a fixed asset such as a piece of machineryF) A) and D)
G) D) and E)

Question 5

The Cannon Ball has projected its first quarter sales at $11,200, second quarter sales at $10,900, and third quarter sales at $13,300. The firm's cost of goods sold is equal to 71 percent of the next quarter's sales. The accounts receivable period is 30 days and the accounts payable period is 60 days. At the beginning of the first quarter, the firm has an accounts receivable balance of $2,800 and an accounts payable balance of $6,300. The firm pays $1,500 a month in cash expenses and $200 a month in taxes. At the beginning of the first quarter, the cash balance is $530 and the short-term loan balance is zero. During the first quarter, the firm is planning on spending $2,600 for some new equipment. The firm maintains a minimum cash balance of $20. Assume each month has 30 days. What is the cumulative cash surplus (deficit)  at the end of the first quarter, prior to any short-term borrowing?

Accepted Answer

A)   -$2,403
B)   -$1,983
C)   -$857
D)   -$837
E)   -$667F) D) and E)
G) All of the above

Question 6

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

Accepted Answer

A)   Decreasing long-term debt
B)   Increasing inventory
C)   Repurchasing shares of stock
D)   Increasing fixed assets
E)   Decreasing accounts receivableF) C) and D)
G) B) and E)

Question 7

Garnishes, Inc. has sales for the year of $46,300 and cost of goods sold of $21,700. The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400. What is the inventory period?

Accepted Answer

A)   12.39 days
B)   18.68 days
C)   31.29 days
D)   80.74 days
E)   91.36 daysF) A) and E)
G) B) and C)

Question 8

The Corner Store has the following estimated sales.  Purchases are equal to 61 percent of the following quarter's sales. Assume each month has 30 days, the accounts receivable period is 30 days and the accounts payable period is 45 days. How much will the firm pay its suppliers in the third quarter?

Accepted Answer

A)   $16,379
B)   $16,811
C)   $18,514
D)   $19,947
E)   $20,893F) A) and E)
G) B) and D)

Question 9

Jenny's has annual sales of $367,200 and cost of goods sold of $198,600. The average accounts receivable balance is $16,400. How many days on average does it take the firm to collect its accounts receivable?

Accepted Answer

A)   16.08 days
B)   16.30 days
C)   17.27 days
D)   17.50 days
E)   18.33 daysF) B) and E)
G) A) and D)

Question 10

Which one of the following is directly related to increases in a firm's current assets?

Accepted Answer

A)   Re-order costs
B)   Shortage costs
C)   Restocking costs
D)   Out-of-stock events
E)   Carrying costsF) All of the above
G) B) and E)

Question 11

Which one of the following activities is most apt to reduce the inventory period?

Accepted Answer

A)   Replacing slow-moving items with faster-selling products
B)   Replacing fresh foods with canned goods
C)   Manufacturing a product for inventory rather than for an order
D)   Increasing the amount of inventory on hand
E)   Decreasing the number of times the inventory turns over per yearF) A) and B)
G) A) and D)

Question 12

Accounts receivable financing is the term used to describe which of the following types of loans which involve either the assignment or the factoring of a firm's accounts receivables?

Accepted Answer

A)   Secured short-term loan
B)   Unsecured short-term loan
C)   Secured long-term loan
D)   Unsecured long-term loan
E)   Trust receipt loanF) B) and E)
G) A) and C)

Question 13

Northern Woods has the following estimated sales.  Purchases are equal to 72 percent of the following quarter's sales. The accounts payable period is 45 days. Assume each month has 30 days. What is the estimated accounts payable balance at the end of quarter two?

Accepted Answer

A)   $6,048
B)   $6,520
C)   $6,624
D)   $4,901
E)   $4,824F) All of the above
G) C) and E)

Question 14

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)   Accounts receivable period
C)   Accounts payable period
D)   Operating cycle
E)   Cash cycleF) A) and B)
G) A) and D)

Question 15

Joseph Schmidt and Co. has the following estimated sales.  Purchases are equal to 64 percent of the following quarter's sales. What is the cash outlay for accounts payable for quarter three if the firm has a 30 day accounts payable period? Assume each month has 30 days.

Accepted Answer

A)   $9,938
B)   $10,539
C)   $3,488
D)   $6,977
E)   $7,503F) B) and E)
G) B) and C)

Question 16

Alderson Metals is compiling a cash balance projection by quarter for next year. Which one of the following adjustments to this projection will decrease the cumulative surplus?

Accepted Answer

A)   Reducing payroll costs from its current projection amount
B)   Decreasing the accounts receivable period by changing the firm's credit policy effective the first of next year
C)   Receiving more favorable credit terms from the firm's suppliers
D)   Increasing the dividend per share on the firm's outstanding common stock
E)   Refinancing the firm's long-term debt at a lower interest rateF) A) and B)
G) B) and D)

Question 17

Tri-City Grocers is a chain of grocery stores that just hired a new CFO. Which of the following actions would you expect this CFO to adopt given her statement that she wants to implement a more flexible financing policy for the firm? I. easing the credit terms given to customers
II)  increasing the amount of inventory carried by each grocery store
III)  borrowing funds to keep more cash available for store operations
IV)  decreasing the firms' investments in marketable securities

Accepted Answer

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

Question 18

Johnson's Tree Farm has a cash balance of $33 and a short-term loan balance of $200 at the beginning of quarter one. The net cash inflow for the first quarter is $89 and for the second quarter there is a net cash outflow of $44. All cash shortfalls are funded with short-term debt. The firm pays 2 percent of its prior quarter's ending loan balance as interest each quarter. The minimum cash balance is $25. What is the short-term loan balance at the end of the first quarter?

Accepted Answer

A)   $107
B)   $111
C)   $121
D)   $128
E)   $133F) A) and B)
G) C) and D)

Question 19

The following is the sales budget for Uptown Rentals, Inc. for the first quarter of 2010:  Credit sales are collected as follows: 60 percent in the month of sale
32 percent in the month after the sale
8 percent in the second month after the sale
The accounts receivable balance at the end of the previous quarter was $87,040 ($73,600 of which was uncollected December sales) . How much did the firm collect in the month of February?

Accepted Answer

A)   $118,533
B)   $121,212
C)   $135,208
D)   $138,615
E)   $147,040F) None of the above
G) All of the above

Question 20

Which one of the following best describes a line of credit?

Accepted Answer

A)   Long-term, prearranged, committed bank loan
B)   Short-term loan secured by accounts receivable
C)   Short-term loan secured by inventory
D)   Long-term, prearranged, noncommitted bank loan
E)   Short-term prearranged bank loan that can be either committed or noncommittedF) C) and D)
G) A) and C)

Exam 16: Short-Term Financial Planning

Garnishes, Inc. has sales for the year of $46,300 and cost of goods sold of $21,700. The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400. What is the inventory period?

Correct Answer
verified

Your firm has an average collection period of 51 days. Current practice is to factor all receivables immediately at a 2.2 percent discount. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.

Correct Answer
verified

Which one of the following best describes a line of credit?

Correct Answer
verified

Joseph Schmidt and Co. has the following estimated sales. Purchases are equal to 64 percent of the following quarter's sales. What is the cash outlay for accounts payable for quarter three if the firm has a 30 day accounts payable period? Assume each month has 30 days.

Correct Answer
verified

The Corner Store has the following estimated sales. Purchases are equal to 61 percent of the following quarter's sales. Assume each month has 30 days, the accounts receivable period is 30 days and the accounts payable period is 45 days. How much will the firm pay its suppliers in the third quarter?

Correct Answer
verified

Which one of the following activities is most apt to reduce the inventory period?

Correct Answer
verified

Al's Meat Market has annual sales of $523,000 and cost of goods sold of $358,000. The profit margin is 4.2 percent and the accounts payable period is 38 days. What is the average accounts payable balance?

Correct Answer
verified

Alderson Metals is compiling a cash balance projection by quarter for next year. Which one of the following adjustments to this projection will decrease the cumulative surplus?

Correct Answer
verified

Jenny's has annual sales of $367,200 and cost of goods sold of $198,600. The average accounts receivable balance is $16,400. How many days on average does it take the firm to collect its accounts receivable?

Correct Answer
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Correct Answer
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Correct Answer
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A firm has an average collection period of 35 days and factors all of its receivables immediately at a 0.95 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?

Correct Answer
verified

Which one of the following is a use of cash?

Correct Answer
verified

Which one of the following is directly related to increases in a firm's current assets?

Correct Answer
verified

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

Correct Answer
verified

Northern Woods has the following estimated sales. Purchases are equal to 72 percent of the following quarter's sales. The accounts payable period is 45 days. Assume each month has 30 days. What is the estimated accounts payable balance at the end of quarter two?

Correct Answer
verified

Accounts receivable financing is the term used to describe which of the following types of loans which involve either the assignment or the factoring of a firm's accounts receivables?

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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Correct Answer
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Correct Answer
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Exam 16: Short-Term Financial Planning

Garnishes, Inc. has sales for the year of $46,300 and cost of goods sold of $21,700. The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400. What is the inventory period?

Correct AnswerverifiedShow Answer

Your firm has an average collection period of 51 days. Current practice is to factor all receivables immediately at a 2.2 percent discount. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.

Correct AnswerverifiedShow Answer

Which one of the following best describes a line of credit?

Correct AnswerverifiedShow Answer

Joseph Schmidt and Co. has the following estimated sales. Purchases are equal to 64 percent of the following quarter's sales. What is the cash outlay for accounts payable for quarter three if the firm has a 30 day accounts payable period? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

The Corner Store has the following estimated sales. Purchases are equal to 61 percent of the following quarter's sales. Assume each month has 30 days, the accounts receivable period is 30 days and the accounts payable period is 45 days. How much will the firm pay its suppliers in the third quarter?

Correct AnswerverifiedShow Answer

Which one of the following activities is most apt to reduce the inventory period?

Correct AnswerverifiedShow Answer

Al's Meat Market has annual sales of $523,000 and cost of goods sold of $358,000. The profit margin is 4.2 percent and the accounts payable period is 38 days. What is the average accounts payable balance?

Correct AnswerverifiedShow Answer

Alderson Metals is compiling a cash balance projection by quarter for next year. Which one of the following adjustments to this projection will decrease the cumulative surplus?

Correct AnswerverifiedShow Answer

Jenny's has annual sales of $367,200 and cost of goods sold of $198,600. The average accounts receivable balance is $16,400. How many days on average does it take the firm to collect its accounts receivable?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm has an average collection period of 35 days and factors all of its receivables immediately at a 0.95 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?

Correct AnswerverifiedShow Answer

Which one of the following is a use of cash?

Correct AnswerverifiedShow Answer

Which one of the following is directly related to increases in a firm's current assets?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Northern Woods has the following estimated sales. Purchases are equal to 72 percent of the following quarter's sales. The accounts payable period is 45 days. Assume each month has 30 days. What is the estimated accounts payable balance at the end of quarter two?

Correct AnswerverifiedShow Answer

Accounts receivable financing is the term used to describe which of the following types of loans which involve either the assignment or the factoring of a firm's accounts receivables?

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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