Question 1

What is a danger in using only short term borrowing?

Accepted Answer

A)  Higher rates than long term borrowing 
B)  Lower fee per loan 
C)  Cost of borrowing can increase 
D)  Less flexibility 
A)  Higher rates than long term borrowing 
B)  Lower fee per loan 
C)  Cost of borrowing can increase 
D)  Less flexibility

Question 2

Car-Quake Stereo plans to sell 500 bass boosters this year.If the carrying cost per unit is $1 and the cost per order is $25,what is the optimal number of units per order?

Accepted Answer

A)  150 
B)  168 
C)  125 
D)  173 
E)  158 
A)  150 
B)  168 
C)  125 
D)  173 
E)  158

Question 3

What would help track the use of discounts offered as well as delinquency occurrence?

Accepted Answer

A)  Debt Table 
B)  Aging Schedule 
C)  Invoice Tracker 
D)  Average Collection Period 
A)  Debt Table 
B)  Aging Schedule 
C)  Invoice Tracker 
D)  Average Collection Period

Question 4

A company has a receivables turnover of 16,a cost of goods sold of $8,000,and an average payables of $1,200.Calculate the collection period.

Accepted Answer

A)  22.81 
B)  54.75 
C)  31.25 
D)  43.16 
E)  25.64 
A)  22.81 
B)  54.75 
C)  31.25 
D)  43.16 
E)  25.64

Question 5

In one sense,holding cash is a waste of resources.

Accepted Answer

A) True 
 B)False

Question 6

Firm X has an accounts payable period of 38 and a costs of goods sold of $7,500.Calculate the Average payables.

Accepted Answer

A)  780.44 
B)  197.37 
C)  835.64 
D)  217.26 
E)  694.61 
A)  780.44 
B)  197.37 
C)  835.64 
D)  217.26 
E)  694.61

Question 7

What is a usual default rate when looking at bad debt losses?

Accepted Answer

A)  2% 
B)  3% 
C)  4% 
D)  5% 
E)  6% 
A)  2% 
B)  3% 
C)  4% 
D)  5% 
E)  6%

Question 8

Which of the following does not relate to "float"?

Accepted Answer

A)  Stock-outs 
B)  Check-processing delays 
C)  Electronic funds transfer (EFT) 
D)  Concentration banking 
A)  Stock-outs 
B)  Check-processing delays 
C)  Electronic funds transfer (EFT) 
D)  Concentration banking

Question 9

The ________ motive for holding cash is the need to pay debts that arise as a regular consequence of doing business.

Accepted Answer

A)  Transactional 
B)  Precautionary 
C)  Speculative 
D)  Intuitive 
A)  Transactional 
B)  Precautionary 
C)  Speculative 
D)  Intuitive

Question 10

The three motives for holding cash are:

Accepted Answer

A)  float reduction, precautionary, and speculative. 
B)  buffer stock, speculative, and transactional. 
C)  speculative, transactional, and precautionary. 
D)  float reduction, buffer stock, and transactional. 
E)  convenience, transactional, and precautionary. 
A)  float reduction, precautionary, and speculative. 
B)  buffer stock, speculative, and transactional. 
C)  speculative, transactional, and precautionary. 
D)  float reduction, buffer stock, and transactional. 
E)  convenience, transactional, and precautionary.

Question 11

At least how much of a typical manufacturing firms assets are tied up in inventory?

Accepted Answer

A)  15% 
B)  25% 
C)  10% 
D)  30% 
E)  35% 
A)  15% 
B)  25% 
C)  10% 
D)  30% 
E)  35%

Question 12

As the amount of credit extended increases,the ________ decreases.

Accepted Answer

A)  Optimal amount of credit 
B)  Net cost of receivables 
C)  Cost of receivables 
D)  Revenues from increased sales 
A)  Optimal amount of credit 
B)  Net cost of receivables 
C)  Cost of receivables 
D)  Revenues from increased sales

Question 13

A company has predicted annual sales of 2500 units,an ordering cost of $35,and a carrying cost of $1.75 per unit.How many orders should they make this year?

Accepted Answer

A)  71.43 
B)  12.65 
C)  7.91 
D)  23.46 
E)  15.64 
A)  71.43 
B)  12.65 
C)  7.91 
D)  23.46 
E)  15.64

Question 14

What stipulates how a firm will handle each phase of the credit decision?

Accepted Answer

A)  Credit Policy 
B)  Credit Period 
C)  Trade Credit 
D)  Cash Discount 
A)  Credit Policy 
B)  Credit Period 
C)  Trade Credit 
D)  Cash Discount

Question 15

Many industries offer trade credit so frequently,that failing to do so would result in failure.What is the real credit decision for companies in such industries?

Accepted Answer

A)  What terms to offer 
B)  Which collection company to use 
C)  How to obtain credit for purchases 
D)  Maximum credit to extend 
A)  What terms to offer 
B)  Which collection company to use 
C)  How to obtain credit for purchases 
D)  Maximum credit to extend

Question 16

________ float can be calculated by subtracting a firm's book balance from the firm's available balance.

Accepted Answer

A)  Net 
B)  Collection 
C)  Electronic funds transfer (EFT) 
D)  Compensating 
E)  Disbursement 
A)  Net 
B)  Collection 
C)  Electronic funds transfer (EFT) 
D)  Compensating 
E)  Disbursement

Question 17

A company has an accounts payable period of 58 days,a collection period of 28 days,and a cash conversion cycle of 43 days.Calculate the operating period.

Accepted Answer

A)  15 
B)  101 
C)  86 
D)  30 
E)  28 
A)  15 
B)  101 
C)  86 
D)  30 
E)  28

Question 18

A company has the possibility to pay off a line of credit early for a 2% discount rate if paid off in 25 days.There are 24.333 discount periods for the year for this money if the discount is not taken.What are the terms for this cash discount?

Accepted Answer

A)  2/25 net 50 
B)  2/25 net 40 
C)  2/25 net 60 
D)  2/25 net 70 
E)  2/25 net 30 
A)  2/25 net 50 
B)  2/25 net 40 
C)  2/25 net 60 
D)  2/25 net 70 
E)  2/25 net 30

Question 19

What is a reason the government prefers electronic banking over paper banking?

Accepted Answer

A)  Increased transaction costs 
B)  Decreased float 
C)  Decreased electronic use 
D)  Decreased banking fraud 
A)  Increased transaction costs 
B)  Decreased float 
C)  Decreased electronic use 
D)  Decreased banking fraud

Question 20

The primary reason for offering customers credit is to

Accepted Answer

A)  increase the predictability of cash flows. 
B)  stimulate sales. 
C)  smooth billing cycles. 
D)  reduce the risk of nonpayment. 
E)  speed cash flows. 
A)  increase the predictability of cash flows. 
B)  stimulate sales. 
C)  smooth billing cycles. 
D)  reduce the risk of nonpayment. 
E)  speed cash flows.

What is a danger in using only short term borrowing?

Car-Quake Stereo plans to sell 500 bass boosters this year.If the carrying cost per unit is $1 and the cost per order is $25,what is the optimal number of units per order?

What would help track the use of discounts offered as well as delinquency occurrence?

A company has a receivables turnover of 16,a cost of goods sold of $8,000,and an average payables of $1,200.Calculate the collection period.

In one sense,holding cash is a waste of resources.

Firm X has an accounts payable period of 38 and a costs of goods sold of $7,500.Calculate the Average payables.

What is a usual default rate when looking at bad debt losses?

Which of the following does not relate to "float"?

The ________ motive for holding cash is the need to pay debts that arise as a regular consequence of doing business.

The three motives for holding cash are:

At least how much of a typical manufacturing firms assets are tied up in inventory?

As the amount of credit extended increases,the ________ decreases.

A company has predicted annual sales of 2500 units,an ordering cost of $35,and a carrying cost of $1.75 per unit.How many orders should they make this year?

What stipulates how a firm will handle each phase of the credit decision?

Many industries offer trade credit so frequently,that failing to do so would result in failure.What is the real credit decision for companies in such industries?

________ float can be calculated by subtracting a firm's book balance from the firm's available balance.

A company has an accounts payable period of 58 days,a collection period of 28 days,and a cash conversion cycle of 43 days.Calculate the operating period.

A company has the possibility to pay off a line of credit early for a 2% discount rate if paid off in 25 days.There are 24.333 discount periods for the year for this money if the discount is not taken.What are the terms for this cash discount?

What is a reason the government prefers electronic banking over paper banking?

The primary reason for offering customers credit is to

Overview of Finance

Financial Statements and Ratio Analysis

Time Value of Money - Introduction

Time Value of Money - Streams and Valuations

Risk and Return - Introduction

Portfolio Theory

Interest Rates and Bond Valuation

Stock Valuation and Market Efficiency

Capital Budgeting Techniques

Capital Budgeting - Cash Flows

Cost of Capital

Capital Structure

Dividends, repurchases, and Splits

Financial Planning

International Finance

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Exam 15: The Management of Working Capital

What is a danger in using only short term borrowing?

Car-Quake Stereo plans to sell 500 bass boosters this year.If the carrying cost per unit is $1 and the cost per order is $25,what is the optimal number of units per order?

What would help track the use of discounts offered as well as delinquency occurrence?

A company has a receivables turnover of 16,a cost of goods sold of $8,000,and an average payables of $1,200.Calculate the collection period.

In one sense,holding cash is a waste of resources.

Firm X has an accounts payable period of 38 and a costs of goods sold of $7,500.Calculate the Average payables.

What is a usual default rate when looking at bad debt losses?

Which of the following does not relate to "float"?

The ________ motive for holding cash is the need to pay debts that arise as a regular consequence of doing business.

The three motives for holding cash are:

At least how much of a typical manufacturing firms assets are tied up in inventory?

As the amount of credit extended increases,the ________ decreases.

A company has predicted annual sales of 2500 units,an ordering cost of $35,and a carrying cost of $1.75 per unit.How many orders should they make this year?

What stipulates how a firm will handle each phase of the credit decision?

Many industries offer trade credit so frequently,that failing to do so would result in failure.What is the real credit decision for companies in such industries?

________ float can be calculated by subtracting a firm's book balance from the firm's available balance.

A company has an accounts payable period of 58 days,a collection period of 28 days,and a cash conversion cycle of 43 days.Calculate the operating period.

A company has the possibility to pay off a line of credit early for a 2% discount rate if paid off in 25 days.There are 24.333 discount periods for the year for this money if the discount is not taken.What are the terms for this cash discount?

What is a reason the government prefers electronic banking over paper banking?

The primary reason for offering customers credit is to

Overview of Finance

Financial Statements and Ratio Analysis

Time Value of Money - Introduction

Time Value of Money - Streams and Valuations

Risk and Return - Introduction

Portfolio Theory

Interest Rates and Bond Valuation

Stock Valuation and Market Efficiency

Capital Budgeting Techniques

Capital Budgeting - Cash Flows

Cost of Capital

Capital Structure

Dividends, repurchases, and Splits

Financial Planning

International Finance

Filters