Question 1

The primary difference between a line of credit and a revolving credit arrangement is the

Accepted Answer

A)  length of the time period covered by the loan agreement.
B)  type of collateral used to secure the loan.
C)  fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured.
D)  fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured.
E)  fact that the revolving credit arrangement requires a cleanup period but the line of credit does not.

Question 2

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

Accepted Answer

A)  increase due to the increased receivables turnover rate.
B)  decrease because the number of days' sales in receivables will decrease.
C)  remain constant because credit sales are constant.
D)  remain constant because the accounts receivable and inventory periods will be constant.
E)  remain constant because cash collections affect the cash cycle,not the operating cycle.

Question 3

True Blue Stores had a beginning accounts payable balance of $87,300 and an ending accounts payable balance of $79,460.Sales for the period were $702,000,and costs of goods sold were $423,600.What is the payables turnover rate?

Accepted Answer

A)  6) 98 times
B)  5) 08 times
C)  8) 23 times
D)  9) 28 times
E)  7) 01 times

Question 4

Smith and Johnson have expected sales of $427,$489,$626,and $738 for the months of January through April,respectively.The accounts receivable period is 15 days.How much did the firm collect in the month of April? Assume a 360-day year.

Accepted Answer

A)  $626
B)  $558
C)  $738
D)  $313
E)  $682

Question 5

Assume you are completing a short-term financial plan spreadsheet.The cumulative surplus will be equal to the

Accepted Answer

A)  ending cash balance minus the minimum cash balance plus the change in short-term debt.
B)  minimum cash balance plus the ending cash balance.
C)  ending cash balance plus the beginning short-term borrowing plus the change in short-term debt.
D)  ending cash balance minus the minimum cash balance.
E)  ending cash balance.

Question 6

As of the beginning of the quarter,a firm has a cash balance of $318.During the quarter,the firm pays its suppliers $297 and collects $398 from customers.It also pays an interest payment of $32 and a tax bill of $164.In addition,the firm borrows $125.What is the cash balance at the end of the quarter?

Accepted Answer

A)  $98
B)  $145
C)  $253
D)  $348
E)  $305

Question 7

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 period

Question 8

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

Accepted Answer

A)  114.67 days
B)  105.21 days
C)  84.56 days
D)  100.41 days
E)  121.59 days

Question 9

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

Accepted Answer

A)  The cash cycle starts when inventory is purchased.
B)  The longer the cash cycle,the more likely a firm will need external financing.
C)  Increasing the accounts payable period increases the cash cycle.
D)  The cash cycle can exceed the operating cycle if the payables period is equal to zero.
E)  Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.

Question 10

A compensating balance I.is required when a firm acquires bank financing other than a line of credit.
II) increases the cost of short-term bank financing.
III) represents an opportunity cost to the lending institution.
IV) is often used as a means of paying for banking services received.

Accepted Answer

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

Question 11

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

Accepted Answer

A)  52.31 days
B)  76.90 days
C)  65.29 days
D)  70.78 days
E)  43.18 days

Question 12

Under which type of credit arrangement does a public warehouse act as a control agent?

Accepted Answer

A)  Blanket inventory liens
B)  Factored liens
C)  Trust receipt financing
D)  Field warehouse financing
E)  Commercial paper arrangements

Question 13

The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

Accepted Answer

A)  74.07 days
B)  93.45 days
C)  79.69 days
D)  100.86 days
E)  89.85 days

Question 14

Bruceton Farms currently has an operating cycle of 76.3 days.The firm is analyzing some operational changes that are expected to decrease the accounts receivable period by 2.8 days and decrease the inventory period by 3.1 days.The accounts payable turnover rate is expected to increase from seven to eight times per year.If all of these changes are adopted,what will be the firm's new operating cycle?

Accepted Answer

A)  68.7 days
B)  61.3 days
C)  54.9 days
D)  70.4 days
E)  76.2 days

Question 15

Which of the following could be the cause of a lengthening cash cycle?

Accepted Answer

A)  Increasing the inventory turnover
B)  Issuing credit to less credit-worthy customers than in previous periods
C)  Increasing the accounts payable period
D)  Extending the time period before paying a supplier for a credit purchase
E)  Offering customers cash discounts for prompt payment

Question 16

Prudoe Fuels factors its accounts receivable immediately at a discount of 1.65 percent.The average collection period is 43 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

Accepted Answer

A)  14.97%
B)  15.17 %
C)  16.09%
D)  16.67%
E)  18.51%

Question 17

Which one of the following is a use of cash?

Accepted Answer

A)  Acquisition of bank loan
B)  Sale of common stock
C)  Sale of marketable securities
D)  Decrease in accounts payable
E)  Decrease in inventory

Question 18

A flexible short-term financial policy

Accepted Answer

A)  increases the likelihood that a firm will face financial distress.
B)  increases the probability that a firm will earn high returns on all of its assets.
C)  advocates a smaller investment in net working capital than a restrictive policy does.
D)  utilizes short-term financing to fund all of the firm's assets.
E)  incurs an opportunity cost due to the rate of return that applies to short-term assets.

Question 19

Which one of these statements is correct?

Accepted Answer

A)  A firm might be able to charge higher prices if it switches from a flexible to a restrictive short-term financial policy.
B)  If a firm adopts a restrictive short-term financial policy,its current assets will be greater than if it adopts a flexible policy.
C)  If a firm switches from a flexible short-term financial policy to a restrictive policy,it is likely to see an increase in its uncollectible accounts receivable.
D)  If a firm switches from a restrictive short-term financial policy to a flexible policy,its operating cycle will most likely decrease.
E)  Future cash flows are expected to be higher if a firm adopts a flexible,rather than a restrictive,short-term financial policy.

Question 20

The total sum of the carrying costs and the shortage costs will be lowest at the point where

Accepted Answer

A)  both the carrying costs and the shortage costs are minimized.
B)  the carrying costs exceed the shortage costs.
C)  the carrying costs equal the shortage costs.
D)  both the carrying costs and the shortage costs are maximized.
E)  the shortage costs exceed the carrying costs.

Exam 18: Short-Term Finance Amcq Planning

Correct Answer
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Which one of the following is a use of cash?

Correct Answer
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The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

Correct Answer
verified

A flexible short-term financial policy

Correct Answer
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A compensating balance I.is required when a firm acquires bank financing other than a line of credit. II) increases the cost of short-term bank financing. III) represents an opportunity cost to the lending institution. IV) is often used as a means of paying for banking services received.

Correct Answer
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Which of the following could be the cause of a lengthening cash cycle?

Correct Answer
verified

Under which type of credit arrangement does a public warehouse act as a control agent?

Correct Answer
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Smith and Johnson have expected sales of $427,$489,$626,and $738 for the months of January through April,respectively.The accounts receivable period is 15 days.How much did the firm collect in the month of April? Assume a 360-day year.

Correct Answer
verified

True Blue Stores had a beginning accounts payable balance of $87,300 and an ending accounts payable balance of $79,460.Sales for the period were $702,000,and costs of goods sold were $423,600.What is the payables turnover rate?

Correct Answer
verified

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

Correct Answer
verified

Assume you are completing a short-term financial plan spreadsheet.The cumulative surplus will be equal to the

Correct Answer
verified

Correct Answer
verified

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

Correct Answer
verified

The primary difference between a line of credit and a revolving credit arrangement is the

Correct Answer
verified

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

Correct Answer
verified

The total sum of the carrying costs and the shortage costs will be lowest at the point where

Correct Answer
verified

Which one of these statements is correct?

Correct Answer
verified

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

Correct Answer
verified

Prudoe Fuels factors its accounts receivable immediately at a discount of 1.65 percent.The average collection period is 43 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

Correct Answer
verified

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

Correct Answer
verified

Exam 18: Short-Term Finance Amcq Planning

Correct AnswerverifiedShow Answer

Which one of the following is a use of cash?

Correct AnswerverifiedShow Answer

The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

Correct AnswerverifiedShow Answer

A flexible short-term financial policy

Correct AnswerverifiedShow Answer

A compensating balance I.is required when a firm acquires bank financing other than a line of credit. II) increases the cost of short-term bank financing. III) represents an opportunity cost to the lending institution. IV) is often used as a means of paying for banking services received.

Correct AnswerverifiedShow Answer

Which of the following could be the cause of a lengthening cash cycle?

Correct AnswerverifiedShow Answer

Under which type of credit arrangement does a public warehouse act as a control agent?

Correct AnswerverifiedShow Answer

Smith and Johnson have expected sales of $427,$489,$626,and $738 for the months of January through April,respectively.The accounts receivable period is 15 days.How much did the firm collect in the month of April? Assume a 360-day year.

Correct AnswerverifiedShow Answer

True Blue Stores had a beginning accounts payable balance of $87,300 and an ending accounts payable balance of $79,460.Sales for the period were $702,000,and costs of goods sold were $423,600.What is the payables turnover rate?

Correct AnswerverifiedShow Answer

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

Correct AnswerverifiedShow Answer

Assume you are completing a short-term financial plan spreadsheet.The cumulative surplus will be equal to the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

Correct AnswerverifiedShow Answer

The primary difference between a line of credit and a revolving credit arrangement is the

Correct AnswerverifiedShow Answer

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

Correct AnswerverifiedShow Answer

The total sum of the carrying costs and the shortage costs will be lowest at the point where

Correct AnswerverifiedShow Answer

Which one of these statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Prudoe Fuels factors its accounts receivable immediately at a discount of 1.65 percent.The average collection period is 43 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

Correct AnswerverifiedShow Answer

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

Correct AnswerverifiedShow Answer

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