Question 1

A positive cash conversion cycle indicates that the…

Accepted Answer

A)  operating cycle exceeds the average payment period. 
B)  average payment period is greater than the operating cycle. 
C)  firm is lengthening its average payment period and lengthening its average collection period. 
D)  shortening its average collection period and lengthening its inventory period. 
A)  operating cycle exceeds the average payment period. 
B)  average payment period is greater than the operating cycle. 
C)  firm is lengthening its average payment period and lengthening its average collection period. 
D)  shortening its average collection period and lengthening its inventory period.

Question 2

Holding all other factors constant, if a firm increases its current assets relative to total assets,

Accepted Answer

A)  it increases return and reduces risk. 
B)  it increases return and increases risk. 
C)  it reduces return and reduces risk. 
D)  it reduces return and increases risk. 
A)  it increases return and reduces risk. 
B)  it increases return and increases risk. 
C)  it reduces return and reduces risk. 
D)  it reduces return and increases risk.

Question 3

The accounts receivable period may be calculated as accounts receivable divided by sales.

Accepted Answer

A) True 
 B)False

Question 4

Holding all other factors constant, if a firm increases its current assets relative to total assets,

Accepted Answer

A)  its financing costs will fall. 
B)  net working capital will rise. 
C)  has no effect on return and reduces risk. 
D)  it reduces return and increases risk. 
A)  its financing costs will fall. 
B)  net working capital will rise. 
C)  has no effect on return and reduces risk. 
D)  it reduces return and increases risk.

Question 5

Credit extended on purchases to a firm's customers is called trade credit.

Accepted Answer

A) True 
 B)False

Question 6

Federal funds rates usually parallel the:

Accepted Answer

A)  prime rate 
B)  U. S. Treasury bill rate 
C)  Dow Jones Industrial Average 
D)  Home loan rates 
A)  prime rate 
B)  U. S. Treasury bill rate 
C)  Dow Jones Industrial Average 
D)  Home loan rates

Question 7

One way a firm can reduce the amount of cash it needs in any one month is to

Accepted Answer

A)  slow down the collection of receivables 
B)  delay the payment of wages 
C)  speed up the payment of taxes 
D)  speed up the payment of payables 
A)  slow down the collection of receivables 
B)  delay the payment of wages 
C)  speed up the payment of taxes 
D)  speed up the payment of payables

Question 8

The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from receivable.

Accepted Answer

A)  cash conversion cycle 
B)  operating cycle 
C)  average age of inventory 
D)  average collection period 
A)  cash conversion cycle 
B)  operating cycle 
C)  average age of inventory 
D)  average collection period

Question 9

Ningbo shipping has projected sales in May, June, and July of $500, $600, and $700, respectively. It makes 20 percent of sales for cash and collects the balance one month following the sale. Ningbo Shipping's total cash receipts in July are

Accepted Answer

A)  $620 
B)  $520 
C)  $680 
D)  $1,100 
A)  $620 
B)  $520 
C)  $680 
D)  $1,100

Question 10

The inventory conversion period is calculated by inventory divided by costs of goods sold.

Accepted Answer

A) True 
 B)False

Question 11

Cash disbursements may include all of the following EXCEPT

Accepted Answer

A)  tax payments 
B)  rent payments 
C)  depreciation expense 
D)  fixed asset outlays 
A)  tax payments 
B)  rent payments 
C)  depreciation expense 
D)  fixed asset outlays

Question 12

Holding marketable securities to take advantage of unusual cash discounts or price bargains on materials if it can pay quickly with cash.

Accepted Answer

A)  Precautionary motives 
B)  Speculative motives 
C)  Safety motives 
D)  Tax motives 
A)  Precautionary motives 
B)  Speculative motives 
C)  Safety motives 
D)  Tax motives

Question 13

Holding all other factors constant, if a firm increases its current liabilities relative to total assets,

Accepted Answer

A)  it increases return and reduces risk. 
B)  it increases return and increases risk. 
C)  it reduces return and reduces risk. 
D)  it reduces return and increases risk. 
A)  it increases return and reduces risk. 
B)  it increases return and increases risk. 
C)  it reduces return and reduces risk. 
D)  it reduces return and increases risk.

Question 14

The accounts payable period is the time between when a firm pays its suppliers for inventory and collecting cash from inventories.

Accepted Answer

A) True 
 B)False

Question 15

A firm with a operating cycle of 200 days and an cash conversion cycle of 120 days has an average payment period of:

Accepted Answer

A)  320 
B)  80 
C)  40 
D)  20 
A)  320 
B)  80 
C)  40 
D)  20

Question 16

A goal of a company's cash management policy is to

Accepted Answer

A)  increase the cash conversion cycle. 
B)  increase the payment period. 
C)  reduce the need to borrow. 
D)  maximize cash outflows. 
A)  increase the cash conversion cycle. 
B)  increase the payment period. 
C)  reduce the need to borrow. 
D)  maximize cash outflows.

Question 17

Holding cash outside of the United States.

Accepted Answer

A)  Precautionary motives 
B)  Speculative motives 
C)  Safety motives 
D)  Tax motives 
A)  Precautionary motives 
B)  Speculative motives 
C)  Safety motives 
D)  Tax motives

Question 18

The accounts payable period would be added to the operating cycle to get the cash conversion cycle.

Accepted Answer

A) True 
 B)False

Question 19

The inventory period is calculated as sales divided by inventories.

Accepted Answer

A) True 
 B)False

Question 20

Precautionary motives for holding cash include holding funds to take advantage of unusual cash discounts for needed materials.

Accepted Answer

A) True 
 B)False

A positive cash conversion cycle indicates that the…

Holding all other factors constant, if a firm increases its current assets relative to total assets,

The accounts receivable period may be calculated as accounts receivable divided by sales.

Holding all other factors constant, if a firm increases its current assets relative to total assets,

Credit extended on purchases to a firm's customers is called trade credit.

Federal funds rates usually parallel the:

One way a firm can reduce the amount of cash it needs in any one month is to

The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from receivable.

Ningbo shipping has projected sales in May, June, and July of $500, $600, and $700, respectively. It makes 20 percent of sales for cash and collects the balance one month following the sale. Ningbo Shipping's total cash receipts in July are

The inventory conversion period is calculated by inventory divided by costs of goods sold.

Cash disbursements may include all of the following EXCEPT

Holding marketable securities to take advantage of unusual cash discounts or price bargains on materials if it can pay quickly with cash.

Holding all other factors constant, if a firm increases its current liabilities relative to total assets,

The accounts payable period is the time between when a firm pays its suppliers for inventory and collecting cash from inventories.

A firm with a operating cycle of 200 days and an cash conversion cycle of 120 days has an average payment period of:

A goal of a company's cash management policy is to

Holding cash outside of the United States.

The accounts payable period would be added to the operating cycle to get the cash conversion cycle.

The inventory period is calculated as sales divided by inventories.

Precautionary motives for holding cash include holding funds to take advantage of unusual cash discounts for needed materials.

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Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 15: Managing Working Capital

A positive cash conversion cycle indicates that the…

Holding all other factors constant, if a firm increases its current assets relative to total assets,

The accounts receivable period may be calculated as accounts receivable divided by sales.

Holding all other factors constant, if a firm increases its current assets relative to total assets,

Credit extended on purchases to a firm's customers is called trade credit.

Federal funds rates usually parallel the:

One way a firm can reduce the amount of cash it needs in any one month is to

The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from receivable.

Ningbo shipping has projected sales in May, June, and July of $500, $600, and $700, respectively. It makes 20 percent of sales for cash and collects the balance one month following the sale. Ningbo Shipping's total cash receipts in July are

The inventory conversion period is calculated by inventory divided by costs of goods sold.

Cash disbursements may include all of the following EXCEPT

Holding marketable securities to take advantage of unusual cash discounts or price bargains on materials if it can pay quickly with cash.

Holding all other factors constant, if a firm increases its current liabilities relative to total assets,

The accounts payable period is the time between when a firm pays its suppliers for inventory and collecting cash from inventories.

A firm with a operating cycle of 200 days and an cash conversion cycle of 120 days has an average payment period of:

A goal of a company's cash management policy is to

Holding cash outside of the United States.

The accounts payable period would be added to the operating cycle to get the cash conversion cycle.

The inventory period is calculated as sales divided by inventories.

Precautionary motives for holding cash include holding funds to take advantage of unusual cash discounts for needed materials.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters