Question 1

Accounts payable ____ cash available for the firm.

Accepted Answer

A)  increase the amount of 
B)  reduce the amount of 
C)  have no effect on the 
D)  represent all of the 
A)  increase the amount of 
B)  reduce the amount of 
C)  have no effect on the 
D)  represent all of the A

Question 2

In a practice known as pledging, a business sells its accounts receivable to a finance company, and the finance company assumes any bad-debt risk.

Accepted Answer

A) True 
 B)False  False

Question 3

Discounted cash flow techniques answer which of the following questions?

Accepted Answer

A)  How much average profit is generated per dollar of average investment? 
B)  Do the cash returns of the investment exceed the cash outlays? 
C)  How long will it take to recover the original investment outlay? 
D)  How does the present value of future benefits from the investment compare to the investment outlay? 
A)  How much average profit is generated per dollar of average investment? 
B)  Do the cash returns of the investment exceed the cash outlays? 
C)  How long will it take to recover the original investment outlay? 
D)  How does the present value of future benefits from the investment compare to the investment outlay? D

Question 4

The question "How many dollars in average profits are generated per dollar of average investment?" is answered using

Accepted Answer

A)  accounting return on investment. 
B)  investment outlay valuation. 
C)  net present value. 
D)  internal rate of return. 
A)  accounting return on investment. 
B)  investment outlay valuation. 
C)  net present value. 
D)  internal rate of return.

Question 5

Failure to recognize the time value of money is a weakness of

Accepted Answer

A)  the internal rate of return method. 
B)  the accounting return on investment technique. 
C)  the net present value method. 
D)  discounted cash flow techniques. 
A)  the internal rate of return method. 
B)  the accounting return on investment technique. 
C)  the net present value method. 
D)  discounted cash flow techniques.

Question 6

Identify the key dates in the chronological sequence of a hypothetical working-capital cycle. List these in order.

Accepted Answer

Day a. Inventory is ordered in anticipat

Question 7

The terms 3/10, net 30 offer

Accepted Answer

A)  a 3 percent discount on purchases paid for within 30 days. 
B)  a 30 percent discount on purchases paid for within 30 days. 
C)  a 3 percent discount on purchases paid for within 10 days. 
D)  a 30 percent discount on purchases paid for within 10 days. 
A)  a 3 percent discount on purchases paid for within 30 days. 
B)  a 30 percent discount on purchases paid for within 30 days. 
C)  a 3 percent discount on purchases paid for within 10 days. 
D)  a 30 percent discount on purchases paid for within 10 days.

Question 8

Net cash flow

Accepted Answer

A)  is the difference between cash inflows and outflows. 
B)  is the difference between revenues and expenses. 
C)  is the same as net profit. 
D)  has little impact on a firm's financial well-being. 
A)  is the difference between cash inflows and outflows. 
B)  is the difference between revenues and expenses. 
C)  is the same as net profit. 
D)  has little impact on a firm's financial well-being.

Question 9

Discounted cash flow techniques take into consideration that cash received today is more valuable than cash received at a later date.

Accepted Answer

A) True 
 B)False

Question 10

Calculations of net present value ignore the time value of money.

Accepted Answer

A) True 
 B)False

Question 11

Accounts receivable financing might include

Accepted Answer

A)  pledging receivables and factoring. 
B)  loaning money against receivables and aging accounts receivable. 
C)  providing cash discounts and charging interest on delinquent accounts. 
D)  aging accounts receivable and using the most effective methods for collecting overdue accounts. 
A)  pledging receivables and factoring. 
B)  loaning money against receivables and aging accounts receivable. 
C)  providing cash discounts and charging interest on delinquent accounts. 
D)  aging accounts receivable and using the most effective methods for collecting overdue accounts.

Question 12

A reason that a small firm would not use a discounted cash flow technique in evaluating capital investments would be that

Accepted Answer

A)  the accounting rate of return is better for a small firm. 
B)  liquidity is less of an issue for a small company. 
C)  small firms invest more in short-term assets than do large companies. 
D)  nonfinancial issues may be more important for a small firm. 
A)  the accounting rate of return is better for a small firm. 
B)  liquidity is less of an issue for a small company. 
C)  small firms invest more in short-term assets than do large companies. 
D)  nonfinancial issues may be more important for a small firm.

Question 13

Wilbur is attempting to raise some quick cash for his business by selling its accounts receivable to a finance company, this is called

Accepted Answer

A)  selling short. 
B)  factoring. 
C)  mortgaging the future. 
D)  pledging receivables. 
A)  selling short. 
B)  factoring. 
C)  mortgaging the future. 
D)  pledging receivables.

Question 14

A project with a positive net present value is acceptable for investment.

Accepted Answer

A) True 
 B)False

Question 15

Calculate the annual interest rate associated with each of the following terms: (a) 2/5, net 30, (b) 2/10, net 20, and (c) 3/15, net 30.

Accepted Answer

a.
Terms of 2/5, net 30: (365 ÷ (30 - 5)

Question 16

Discounted cash flow techniques of analysis include

Accepted Answer

A)  return on investment and net present value methods. 
B)  net present value and investment outlay valuation methods. 
C)  accounting ratio analysis and internal rate of return methods. 
D)  net present value and internal rate of return methods. 
A)  return on investment and net present value methods. 
B)  net present value and investment outlay valuation methods. 
C)  accounting ratio analysis and internal rate of return methods. 
D)  net present value and internal rate of return methods.

Question 17

Popularity, use of cash flows rather than accounting profits, and failure to consider the time value of money characterize

Accepted Answer

A)  the payback period technique. 
B)  discounted cash flow techniques. 
C)  the investment outlay valuation technique. 
D)  long-term investment analysis. 
A)  the payback period technique. 
B)  discounted cash flow techniques. 
C)  the investment outlay valuation technique. 
D)  long-term investment analysis.

Question 18

The accounting return on investment technique is characterized by the fact that

Accepted Answer

A)  it is simple to calculate. 
B)  it is based on actual cash flows received. 
C)  it takes into account the time value of money. 
D)  it is a relatively unpopular technique. 
A)  it is simple to calculate. 
B)  it is based on actual cash flows received. 
C)  it takes into account the time value of money. 
D)  it is a relatively unpopular technique.

Question 19

Capital budgeting analysis helps managers make decisions about long-term investments.

Accepted Answer

A) True 
 B)False

Question 20

The life cycle of receivables begins with which of the following stages?

Accepted Answer

A)  A credit sale 
B)  The processing of an invoice by a customer 
C)  Funds remittance 
D)  Collection 
A)  A credit sale 
B)  The processing of an invoice by a customer 
C)  Funds remittance 
D)  Collection

Exam 22: Managing the Firms Assets

Accounts payable ____ cash available for the firm.

In a practice known as pledging, a business sells its accounts receivable to a finance company, and the finance company assumes any bad-debt risk.

Discounted cash flow techniques answer which of the following questions?

The question "How many dollars in average profits are generated per dollar of average investment?" is answered using

Failure to recognize the time value of money is a weakness of

Identify the key dates in the chronological sequence of a hypothetical working-capital cycle. List these in order.

The terms 3/10, net 30 offer

Net cash flow

Discounted cash flow techniques take into consideration that cash received today is more valuable than cash received at a later date.

Calculations of net present value ignore the time value of money.

Accounts receivable financing might include

A reason that a small firm would not use a discounted cash flow technique in evaluating capital investments would be that

Wilbur is attempting to raise some quick cash for his business by selling its accounts receivable to a finance company, this is called

A project with a positive net present value is acceptable for investment.

Calculate the annual interest rate associated with each of the following terms: (a) 2/5, net 30, (b) 2/10, net 20, and (c) 3/15, net 30.

Discounted cash flow techniques of analysis include

Popularity, use of cash flows rather than accounting profits, and failure to consider the time value of money characterize

The accounting return on investment technique is characterized by the fact that

Capital budgeting analysis helps managers make decisions about long-term investments.

The life cycle of receivables begins with which of the following stages?

The Entrepreneurial Life

Entrepreneurial Integrity and Ethics

Getting Started

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Human Resources Plan: Managers, Owners, Allies, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Business

Professional Management in the Entrepreneurial Firm

Managing Human Resources

Managing Operations

Managing Risk in the Small Business

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