Question 1

In relation to the economic order quantity model:

Accepted Answer

A)  the higher the price paid for inventory, the more frequently it should be ordered. 
B)  the higher the price paid for inventory, the less frequently it should be ordered. 
C)  the price paid for inventory does not directly affect the frequency of inventory ordering. 
D)  none of the above is true. 
A)  the higher the price paid for inventory, the more frequently it should be ordered. 
B)  the higher the price paid for inventory, the less frequently it should be ordered. 
C)  the price paid for inventory does not directly affect the frequency of inventory ordering. 
D)  none of the above is true.

Question 2

Which of the following is not necessarily true? Increasing the cash discount which a firm offers to its debtors for prompt payment will:

Accepted Answer

A)  reduce the average collection period. 
B)  increase the net profit of the firm. 
C)  reduce average accounts receivable. 
D)  All of the statements are true. 
A)  reduce the average collection period. 
B)  increase the net profit of the firm. 
C)  reduce average accounts receivable. 
D)  All of the statements are true.

Question 3

Extending the credit period granted,with all other components of the credit policy remaining unchanged,will most likely cause:

Accepted Answer

A)  a decrease in sales. 
B)  a decrease in bad debts. 
C)  a decrease in accounts receivable. 
D)  none of the above. 
A)  a decrease in sales. 
B)  a decrease in bad debts. 
C)  a decrease in accounts receivable. 
D)  none of the above.

Question 4

When trying to assess the credit standing of a customer,a financial analyst could use which of the following sources?

Accepted Answer

A)  Credit ratings and reports from credit agencies. 
B)  Financial statements of the credit applicant. 
C)  Other suppliers. 
D)  All of the above. 
A)  Credit ratings and reports from credit agencies. 
B)  Financial statements of the credit applicant. 
C)  Other suppliers. 
D)  All of the above.

Question 5

A firm has daily credit sales of $50,000,and its average collection period is 50 days.Its average accounts receivable balance is:

Accepted Answer

A)  $1,000. 
B)  $1,000,000. 
C)  $2,500,000. 
D)  $50,000. 
A)  $1,000. 
B)  $1,000,000. 
C)  $2,500,000. 
D)  $50,000.

Question 6

Use the information below to answer the following questions
Aqua Ltd has forecast the yearly demand for its product as 5,000 units. 100 units of material must be used to produce the product. The cost of placing a single order for raw materials is $20, and the cost of holding one unit of material is $0.40 a year.
-Refer to the information above.The economic order quantity for raw materials is:

Accepted Answer

A)  7,071 units. 
B)  10,000 units. 
C)  1,000 units. 
D)  100 units. 
A)  7,071 units. 
B)  10,000 units. 
C)  1,000 units. 
D)  100 units.

Question 7

A decline in the level of working capital will:

Accepted Answer

A)  leave risk unchanged. 
B)  working capital is not related to risk. 
C)  reduce risk. 
D)  increase risk. 
A)  leave risk unchanged. 
B)  working capital is not related to risk. 
C)  reduce risk. 
D)  increase risk.

Question 8

Procedures and techniques for managing inventory are all of the following except:

Accepted Answer

A)  payback method. 
B)  economic order quantity model. 
C)  the ABC system of control. 
D)  financial ratios. 
A)  payback method. 
B)  economic order quantity model. 
C)  the ABC system of control. 
D)  financial ratios.

Question 9

The length of the period of credit granted to customers will be affected by:

Accepted Answer

A)  the degree of competition within the industry. 
B)  the bargaining power of particular customers. 
C)  typical credit terms operating within the industry. 
D)  all of the above. 
A)  the degree of competition within the industry. 
B)  the bargaining power of particular customers. 
C)  typical credit terms operating within the industry. 
D)  all of the above.

Question 10

The item that is not part of working capital is:

Accepted Answer

A)  cash. 
B)  plant. 
C)  accounts receivable. 
D)  inventory. 
A)  cash. 
B)  plant. 
C)  accounts receivable. 
D)  inventory.

Question 11

Which statement concerning the economic order quantity (EOQ)model is not correct?

Accepted Answer

A)  The lower the level of inventory held, the greater the number of orders required. 
B)  A decrease in the number of orders increases the overall cost of ordering inventory. 
C)  The more inventory that is held the higher the cost of holding inventory. 
D)  None of the above, i.e., all are correct statements. 
A)  The lower the level of inventory held, the greater the number of orders required. 
B)  A decrease in the number of orders increases the overall cost of ordering inventory. 
C)  The more inventory that is held the higher the cost of holding inventory. 
D)  None of the above, i.e., all are correct statements.

Question 12

Annual demand for product G is 117,000 units and the lead-time for orders is three weeks.Demand is steady throughout the year.Assuming no buffer stock is held,at what level of inventory should the company reorder product G?

Accepted Answer

A)  39,000 units. 
B)  2,250 units. 
C)  58,500 units. 
D)  6,750 units. 
A)  39,000 units. 
B)  2,250 units. 
C)  58,500 units. 
D)  6,750 units.

Question 13

Which statement concerning inventory is not true?

Accepted Answer

A)  Regular physical stocktakes are part of the efficient management of inventory. 
B)  Electronic point of sale systems greatly assist in the management of inventory. 
C)  All categories of inventory should always be subject to the same degree of control. 
D)  None of the above, i.e., all are true statements. 
A)  Regular physical stocktakes are part of the efficient management of inventory. 
B)  Electronic point of sale systems greatly assist in the management of inventory. 
C)  All categories of inventory should always be subject to the same degree of control. 
D)  None of the above, i.e., all are true statements.

Question 14

The motive behind the holding of cash balances to protect the firm from unforeseen cash requirements is known as:

Accepted Answer

A)  the transaction motive. 
B)  the precautionary motive. 
C)  the legal motive. 
D)  the speculative motive. 
A)  the transaction motive. 
B)  the precautionary motive. 
C)  the legal motive. 
D)  the speculative motive.

Question 15

The business which is likely to have the heaviest investment in working capital is a:

Accepted Answer

A)  wholesaler. 
B)  manufacturer. 
C)  service business. 
D)  retailer. 
A)  wholesaler. 
B)  manufacturer. 
C)  service business. 
D)  retailer.

Question 16

The economic order quantity model is concerned with answering the question:

Accepted Answer

A)  How much inventory should be held? 
B)  What should be the size of an inventory order? 
C)  What is the cost of ordering inventory? 
D)  All of the above. 
A)  How much inventory should be held? 
B)  What should be the size of an inventory order? 
C)  What is the cost of ordering inventory? 
D)  All of the above.

Question 17

An increase in the effort put into collection of accounts receivable will result in ________ in the investment in accounts receivable,________ in bad debts expense,and ________ in collections expenditure.

Accepted Answer

A)  a decrease; an increase; a decrease 
B)  a decrease; a decrease; an increase 
C)  an increase; a decrease; an increase 
D)  a decrease; an increase; an increase 
A)  a decrease; an increase; a decrease 
B)  a decrease; a decrease; an increase 
C)  an increase; a decrease; an increase 
D)  a decrease; an increase; an increase

Question 18

Which statement is not true?

Accepted Answer

A)  A firm should always have a surplus holding of cash. 
B)  If a firm has a cash deficit, it may need to reschedule its cash payments. 
C)  If a firm has a cash deficit, it may need to arrange to borrow money. 
D)  If a firm has a cash surplus, it should make the best use of the surplus. 
A)  A firm should always have a surplus holding of cash. 
B)  If a firm has a cash deficit, it may need to reschedule its cash payments. 
C)  If a firm has a cash deficit, it may need to arrange to borrow money. 
D)  If a firm has a cash surplus, it should make the best use of the surplus.

Question 19

Which of these is not a way in which the length of the operating cash cycle can be reduced?

Accepted Answer

A)  Cut back on the average time inventory is held. 
B)  Reduce the time taken to pay accounts payable. 
C)  Impose tighter controls on accounts receivable to encourage prompt payment. 
D)  None of the above, i.e., all are ways in which the length of the operating cash cycle can be reduced. 
A)  Cut back on the average time inventory is held. 
B)  Reduce the time taken to pay accounts payable. 
C)  Impose tighter controls on accounts receivable to encourage prompt payment. 
D)  None of the above, i.e., all are ways in which the length of the operating cash cycle can be reduced.

Question 20

Credit should be granted to customers in which circumstance?

Accepted Answer

A)  If bad debts can be minimised. 
B)  If the benefits exceed the costs. 
C)  If sales can be increased. 
D)  If others in the industry grant credit. 
A)  If bad debts can be minimised. 
B)  If the benefits exceed the costs. 
C)  If sales can be increased. 
D)  If others in the industry grant credit.

In relation to the economic order quantity model:

Which of the following is not necessarily true? Increasing the cash discount which a firm offers to its debtors for prompt payment will:

Extending the credit period granted,with all other components of the credit policy remaining unchanged,will most likely cause:

When trying to assess the credit standing of a customer,a financial analyst could use which of the following sources?

A firm has daily credit sales of $50,000,and its average collection period is 50 days.Its average accounts receivable balance is:

A decline in the level of working capital will:

Procedures and techniques for managing inventory are all of the following except:

The length of the period of credit granted to customers will be affected by:

The item that is not part of working capital is:

Which statement concerning the economic order quantity (EOQ)model is not correct?

Annual demand for product G is 117,000 units and the lead-time for orders is three weeks.Demand is steady throughout the year.Assuming no buffer stock is held,at what level of inventory should the company reorder product G?

Which statement concerning inventory is not true?

The motive behind the holding of cash balances to protect the firm from unforeseen cash requirements is known as:

The business which is likely to have the heaviest investment in working capital is a:

The economic order quantity model is concerned with answering the question:

An increase in the effort put into collection of accounts receivable will result in in the investment in accounts receivable, in bad debts expense,and in collections expenditure.

Which statement is not true?

Which of these is not a way in which the length of the operating cash cycle can be reduced?

Credit should be granted to customers in which circumstance?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

Financing the Business

Filters

Exam 13: The Management of Working Capital

In relation to the economic order quantity model:

Which of the following is not necessarily true? Increasing the cash discount which a firm offers to its debtors for prompt payment will:

Extending the credit period granted,with all other components of the credit policy remaining unchanged,will most likely cause:

When trying to assess the credit standing of a customer,a financial analyst could use which of the following sources?

A firm has daily credit sales of $50,000,and its average collection period is 50 days.Its average accounts receivable balance is:

A decline in the level of working capital will:

Procedures and techniques for managing inventory are all of the following except:

The length of the period of credit granted to customers will be affected by:

The item that is not part of working capital is:

Which statement concerning the economic order quantity (EOQ)model is not correct?

Annual demand for product G is 117,000 units and the lead-time for orders is three weeks.Demand is steady throughout the year.Assuming no buffer stock is held,at what level of inventory should the company reorder product G?

Which statement concerning inventory is not true?

The motive behind the holding of cash balances to protect the firm from unforeseen cash requirements is known as:

The business which is likely to have the heaviest investment in working capital is a:

The economic order quantity model is concerned with answering the question:

An increase in the effort put into collection of accounts receivable will result in ________ in the investment in accounts receivable,________ in bad debts expense,and ________ in collections expenditure.

Which statement is not true?

Which of these is not a way in which the length of the operating cash cycle can be reduced?

Credit should be granted to customers in which circumstance?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

Financing the Business

Filters

An increase in the effort put into collection of accounts receivable will result in in the investment in accounts receivable, in bad debts expense,and in collections expenditure.