Question 1

Which of the following inventory management techniques gives the optimal amount of inventory to be purchased?

Accepted Answer

A)  Economic order quantity model 
B)  Lockbox system 
C)  Payables system 
D)  Outsourcing arrangement 
E)  Quantity discount model 
A)  Economic order quantity model 
B)  Lockbox system 
C)  Payables system 
D)  Outsourcing arrangement 
E)  Quantity discount model A

Question 2

Sunshine Inc. tightened its credit policy, resulting in a $10 change in net present value (NPV) on a daily basis. If Sunshine's expected return is 8%, then the change in the value of the firm is_____. (Note: Assume 360 days in a year)

Accepted Answer

A)  $20,000 
B)  $5,000 
C)  $34,000 
D)  $45,000 
E)  $60,000 
A)  $20,000 
B)  $5,000 
C)  $34,000 
D)  $45,000 
E)  $60,000 D

Question 3

A _____ current asset investment policy calls for relatively large amounts of current assets to be carried by a company.

Accepted Answer

A)  relaxed 
B)  restricted 
C)  moderate 
D)  lean-and-mean 
E)  precautionary 
A)  relaxed 
B)  restricted 
C)  moderate 
D)  lean-and-mean 
E)  precautionary A

Question 4

Firms should own marketable securities because they:

Accepted Answer

A)  serve as a substitute for long-term debt. 
B)  offer a place to temporarily put cash balance without any returns. 
C)  are used for managing accounts receivables. 
D)  are risky investments that cannot be sold easily in the market. 
E)  include securities that can be traded in the money market. 
A)  serve as a substitute for long-term debt. 
B)  offer a place to temporarily put cash balance without any returns. 
C)  are used for managing accounts receivables. 
D)  are risky investments that cannot be sold easily in the market. 
E)  include securities that can be traded in the money market.

Question 5

Which of the following is a common method of disbursement or cash outflow control?

Accepted Answer

A)  Lockbox arrangement 
B)  Zero-balance account 
C)  Concentration banking 
D)  Preauthorized debits 
E)  Net float agreement 
A)  Lockbox arrangement 
B)  Zero-balance account 
C)  Concentration banking 
D)  Preauthorized debits 
E)  Net float agreement

Question 6

The economic ordering quantity (EOQ) for Nashville Records Inc. from the information given below is _____. (Round the answer to the nearest whole number.) Sales = 15,000 units per year
Sales price = $10 per unit
Purchase price = $5
Carrying cost = 0.25 times inventory value
Fixed cost per order = $1,000

Accepted Answer

A)  3,464 units 
B)  4,899 units 
C)  346 units 
D)  490 units 
E)  1,549 units 
A)  3,464 units 
B)  4,899 units 
C)  346 units 
D)  490 units 
E)  1,549 units

Question 7

A restricted current asset investment policy will cause a firm to hold maximum levels of safety stocks for cash and inventories, and to have a liberal credit policy.

Accepted Answer

A) True 
 B)False

Question 8

Outsourcing is an inventory control procedure where a red line is drawn around the inside of an inventory-stocked bin to indicate the reorder point level.

Accepted Answer

A) True 
 B)False

Question 9

Having synchronized cash flows enables a firm to:

Accepted Answer

A)  speed up collections on checks written. 
B)  increase its bank loans. 
C)  increase its interest expenses. 
D)  increase its profits. 
E)  increase its cash balances. 
A)  speed up collections on checks written. 
B)  increase its bank loans. 
C)  increase its interest expenses. 
D)  increase its profits. 
E)  increase its cash balances.

Question 10

A change in the credit policy will be beneficial to a firm if it results in an increase in the:

Accepted Answer

A)  days sales outstanding. 
B)  bad debt loss. 
C)  net present value. 
D)  fixed costs. 
E)  variable costs. 
A)  days sales outstanding. 
B)  bad debt loss. 
C)  net present value. 
D)  fixed costs. 
E)  variable costs.

Question 11

A firm should adopt a new credit policy if it reduces the value of the firm.

Accepted Answer

A) True 
 B)False

Question 12

Ace Hardware's economic order quantity (EOQ) is 100 widgets, its total demand is 20,000 units per period, its carrying cost per unit is 20% of inventory value, its purchase price $4, and its fixed costs per order is $20. Which of the following is the total inventory cost of Ace?

Accepted Answer

A)  $1,250 
B)  $3,250 
C)  $1,750 
D)  $2,000 
E)  $4,040 
A)  $1,250 
B)  $3,250 
C)  $1,750 
D)  $2,000 
E)  $4,040

Question 13

Rainbow Inc. has expected sales of $200,000 a month. Rainbow's cash sales are 10% of total sales and the remaining 90 percent pay on credit, of which 20% take advantage of a discount and rest pay during the following month. If Rainbow's credit policy is 2/10 net 30, the amount of discount offered by Rainbow is _____.

Accepted Answer

A)  $850. 
B)  $720. 
C)  $560. 
D)  $485. 
E)  $900. 
A)  $850. 
B)  $720. 
C)  $560. 
D)  $485. 
E)  $900.

Question 14

Which of the following statements is correct regarding cash budgets?

Accepted Answer

A)  Cash disbursements for credit purchases are not included in cash budgets. 
B)  Only cash inflow from cash sales are included in cash budgets. 
C)  The target cash balance set in cash budgets are fixed. 
D)  Cash budgets do not include cash flow through investment activities. 
E)  Cash budgets include the tax expenses of a firm. 
A)  Cash disbursements for credit purchases are not included in cash budgets. 
B)  Only cash inflow from cash sales are included in cash budgets. 
C)  The target cash balance set in cash budgets are fixed. 
D)  Cash budgets do not include cash flow through investment activities. 
E)  Cash budgets include the tax expenses of a firm.

Question 15

Chadmark Corporation's budgeted monthly sales are $3,000. 40 percent of its customers pay in the same month and take the 2 percent discount. The remaining 60 percent pay in the month following the sale and don't receive a discount. Chadmark's total receipts for a typical month i.

Accepted Answer

A)  $1,543 
B)  $2,976 
C)  $3,200 
D)  $1,652 
E)  $2,408 
A)  $1,543 
B)  $2,976 
C)  $3,200 
D)  $1,652 
E)  $2,408

Question 16

A cash balance held in reserve for unforeseen fluctuations in cash flows is called a _____ balance.

Accepted Answer

A)  transactions 
B)  compensating 
C)  precautionary 
D)  speculative 
E)  lockbox 
A)  transactions 
B)  compensating 
C)  precautionary 
D)  speculative 
E)  lockbox

Question 17

_____ increase the prices of products that are allowed to be imported.

Accepted Answer

A)  Stockouts 
B)  Tariffs 
C)  Quotas 
D)  Discounts 
E)  Expropriations 
A)  Stockouts 
B)  Tariffs 
C)  Quotas 
D)  Discounts 
E)  Expropriations

Question 18

A report showing how long accounts receivable have been outstanding is called _____.

Accepted Answer

A)  a time line 
B)  a preauthorized debit system 
C)  an aging schedule 
D)  an account tracker 
E)  a credit document 
A)  a time line 
B)  a preauthorized debit system 
C)  an aging schedule 
D)  an account tracker 
E)  a credit document

Question 19

Money market instruments are held as marketable securities.

Accepted Answer

A) True 
 B)False

Question 20

Firms following a restricted current asset investment policy:

Accepted Answer

A)  have uncertain sales and operations. 
B)  have relatively low levels of accounts receivable. 
C)  have a lower return on investment, especially on current assets. 
D)  have the longest cash conversion cycle in the industry. 
E)  have the highest inventory conversion in the industry. 
A)  have uncertain sales and operations. 
B)  have relatively low levels of accounts receivable. 
C)  have a lower return on investment, especially on current assets. 
D)  have the longest cash conversion cycle in the industry. 
E)  have the highest inventory conversion in the industry.

Which of the following inventory management techniques gives the optimal amount of inventory to be purchased?

Sunshine Inc. tightened its credit policy, resulting in a $10 change in net present value (NPV) on a daily basis. If Sunshine's expected return is 8%, then the change in the value of the firm is_____. (Note: Assume 360 days in a year)

A _____ current asset investment policy calls for relatively large amounts of current assets to be carried by a company.

Firms should own marketable securities because they:

Which of the following is a common method of disbursement or cash outflow control?

A restricted current asset investment policy will cause a firm to hold maximum levels of safety stocks for cash and inventories, and to have a liberal credit policy.

Outsourcing is an inventory control procedure where a red line is drawn around the inside of an inventory-stocked bin to indicate the reorder point level.

Having synchronized cash flows enables a firm to:

A change in the credit policy will be beneficial to a firm if it results in an increase in the:

A firm should adopt a new credit policy if it reduces the value of the firm.

Ace Hardware's economic order quantity (EOQ) is 100 widgets, its total demand is 20,000 units per period, its carrying cost per unit is 20% of inventory value, its purchase price $4, and its fixed costs per order is $20. Which of the following is the total inventory cost of Ace?

Which of the following statements is correct regarding cash budgets?

Chadmark Corporation's budgeted monthly sales are $3,000. 40 percent of its customers pay in the same month and take the 2 percent discount. The remaining 60 percent pay in the month following the sale and don't receive a discount. Chadmark's total receipts for a typical month i.

A cash balance held in reserve for unforeseen fluctuations in cash flows is called a _____ balance.

_____ increase the prices of products that are allowed to be imported.

A report showing how long accounts receivable have been outstanding is called _____.

Money market instruments are held as marketable securities.

Firms following a restricted current asset investment policy:

An Overview of Managerial Finance

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Financial Planning and Control

Filters

Exam 15: Managing Short-Term Assets

Which of the following inventory management techniques gives the optimal amount of inventory to be purchased?

Sunshine Inc. tightened its credit policy, resulting in a $10 change in net present value (NPV) on a daily basis. If Sunshine's expected return is 8%, then the change in the value of the firm is_____. (Note: Assume 360 days in a year)

A _____ current asset investment policy calls for relatively large amounts of current assets to be carried by a company.

Firms should own marketable securities because they:

Which of the following is a common method of disbursement or cash outflow control?

A restricted current asset investment policy will cause a firm to hold maximum levels of safety stocks for cash and inventories, and to have a liberal credit policy.

Outsourcing is an inventory control procedure where a red line is drawn around the inside of an inventory-stocked bin to indicate the reorder point level.

Having synchronized cash flows enables a firm to:

A change in the credit policy will be beneficial to a firm if it results in an increase in the:

A firm should adopt a new credit policy if it reduces the value of the firm.

Ace Hardware's economic order quantity (EOQ) is 100 widgets, its total demand is 20,000 units per period, its carrying cost per unit is 20% of inventory value, its purchase price $4, and its fixed costs per order is $20. Which of the following is the total inventory cost of Ace?

Which of the following statements is correct regarding cash budgets?

Chadmark Corporation's budgeted monthly sales are $3,000. 40 percent of its customers pay in the same month and take the 2 percent discount. The remaining 60 percent pay in the month following the sale and don't receive a discount. Chadmark's total receipts for a typical month i.

A cash balance held in reserve for unforeseen fluctuations in cash flows is called a _____ balance.

_____ increase the prices of products that are allowed to be imported.

A report showing how long accounts receivable have been outstanding is called _____.

Money market instruments are held as marketable securities.

Firms following a restricted current asset investment policy:

An Overview of Managerial Finance

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Financial Planning and Control

Filters