Deck 13: Working Capital Management

Question 1

Using the information provided,what is the length of the production cycle for the firm? Allied Industries, Inc.
Selected Income Statement Items, 2017
$\begin{array}{ll}\text { Cash Sales } & \$ 1,500,000 \\\text { Credit Sales } & \$ 7,500,000 \\\text { Total Sales } & \$ 9,000,000 \\\text { COGS } & \$ 6,000,000\end{array}$
Allied Industries, Inc.
Selected Balance Sheet Accounts
$\begin{array}{llll}&12/31/2017 &12/31/2016&\text { Change }\\\text { Accounts Receivable } & \$ 270,000 & \$ 240,000 & \$ 30,000 \\\text { Inventory } & \$ 125,000 & \$ 100,000 & \$ 25,000 \\\text { Accounts Payable } & \$ 110,000 & \$ 90,000 & \$ 20,000\end{array}$

A)6.08 days
B)7.60 days
C)53.33 days
D)6.84 days

Answer 1

6.84 days

Question 2

Cash customers generally provide for a shorter cash conversion cycle than do credit customers in part because there is no additional collection cycle for the cash customers as there is with credit customers.

Answer 2

True

Question 3

To determine the average cash conversion cycle,we must first compute the average production cycle,the average collection cycle,and the average payment cycle.

Answer 3

True

Question 4

The cash conversion cycle is comprised of the production cycle minus the collection cycle plus the payment cycle.

Question 5

Jolly Roger Kite Company has a payment cycle of 17 days,a collection cycle of 31 days,and a production cycle of 12 days.What is the average cash conversion cycle for the Jolly Roger Company?

A)2 days
B)36 days
C)26 days
D)60 days

Question 6

The time between when a raw material is ordered and received and when it is paid for is called the cash conversion cycle.

Question 7

The ________ is the period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.

A)cash conversion cycle
B)accounts receivable cycle
C)current ratio
D)business operating cycle

Question 8

The production cycle ________.

A)is the period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service
B)begins at the time a firm first starts to make a product and lasts until the time the customer buys the product
C)starts when production begins and ends with the collection of cash from the sale of the product
D)starts when the customer takes delivery of the product and ends when the firm receives payment for the product

Question 9

The ________ starts at the time production begins and ends with the collection of cash from the sale of the product.

A)accounts receivable cycle
B)business operating cycle
C)cash conversion cycle
D)production cycle

Question 10

The ________ begins at the time a firm first starts to make a product and lasts until the time the customer buys the product.

A)business operating cycle
B)accounts receivable cycle
C)cash conversion cycle
D)production cycle

Question 11

Using the information provided,what is the accounts payable cycle for the firm? Allied Industries, Inc.
Selected Income Statement Items, 2017
$\begin{array}{ll}\text { Cash Sales } & \$ 1,500,000 \\\text { Credit Sales } & \$ 7,500,000 \\\text { Total Sales } & \$ 9,000,000 \\\text { COGS } & \$ 6,000,000\end{array}$
Allied Industries, Inc.
Selected Balance Sheet Accounts
$\begin{array}{llll}&12/31/2017 &12/31/2016&\text { Change }\\\text { Accounts Receivable } & \$ 270,000 & \$ 240,000 & \$ 30,000 \\\text { Inventory } & \$ 125,000 & \$ 100,000 & \$ 25,000 \\\text { Accounts Payable } & \$ 110,000 & \$ 90,000 & \$ 20,000\end{array}$

A)4.06 days
B)4.87 days
C)6.08 days
D)24.33 days

Question 12

Using the information provided,what is the accounts receivable turnover for the firm? Allied Industries, Inc.
Selected Income Statement Items, 2017
$\begin{array}{ll}\text { Cash Sales } & \$ 1,500,000 \\\text { Credit Sales } & \$ 7,500,000 \\\text { Total Sales } & \$ 9,000,000 \\\text { COGS } & \$ 6,000,000\end{array}$
Allied Industries, Inc.
Selected Balance Sheet Accounts
$\begin{array}{llll}&12/31/2017 &12/31/2016&\text { Change }\\\text { Accounts Receivable } & \$ 270,000 & \$ 240,000 & \$ 30,000 \\\text { Inventory } & \$ 125,000 & \$ 100,000 & \$ 25,000 \\\text { Accounts Payable } & \$ 110,000 & \$ 90,000 & \$ 20,000\end{array}$

A)23.53 times
B)29.41 times
C)53.33 times
D)60.00 times

Question 13

The business operating cycle has two components: the production cycle and the collection cycle.

Question 14

Which of the following is NOT true of the cash conversion cycle?

A)It is the net period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.
B)Cash Conversion Cycle = Production Cycle + Collection Cycle - Payment Cycle
C)Cash Conversion Cycle = Production Cycle + Collection Cycle + Payment Cycle
D)The cash conversion cycle essentially measures how quickly a company can convert its products or services into cash.

Question 15

One way to reduce a firm's cash conversion cycle would be to have as many customers as possible pay using credit rather than cash.

Question 16

Managing assets and liabilities in such a way as to improve the company's flow of funds is what capital budgeting is all about.

Question 17

Managing the relationship between current assets and current liabilities of the firm in order to improve the flow of funds is called ________.

A)the business operating cycle
B)the cash conversion cycle
C)working capital management
D)the production cycle

Question 18

Using the information provided,what is the collection cycle for the firm? Allied Industries, Inc.
Selected Income Statement Items, 2017
$\begin{array}{ll}\text { Cash Sales } & \$ 1,500,000 \\\text { Credit Sales } & \$ 7,500,000 \\\text { Total Sales } & \$ 9,000,000 \\\text { COGS } & \$ 6,000,000\end{array}$
Allied Industries, Inc.
Selected Balance Sheet Accounts
$\begin{array}{llll}&12/31/2017 &12/31/2016&\text { Change }\\\text { Accounts Receivable } & \$ 270,000 & \$ 240,000 & \$ 30,000 \\\text { Inventory } & \$ 125,000 & \$ 100,000 & \$ 25,000 \\\text { Accounts Payable } & \$ 110,000 & \$ 90,000 & \$ 20,000\end{array}$

A)6.84 days
B)7.60 days
C)10.34 days
D)12.41 days

Question 19

The cash conversion cycle is the net period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.

Question 20

Using the information provided,what is the inventory turnover for the firm? Allied Industries, Inc.
Selected Income Statement Items, 2017
$\begin{array}{ll}\text { Cash Sales } & \$ 1,500,000 \\\text { Credit Sales } & \$ 7,500,000 \\\text { Total Sales } & \$ 9,000,000 \\\text { COGS } & \$ 6,000,000\end{array}$
Allied Industries, Inc.
Selected Balance Sheet Accounts
$\begin{array}{llll}&12/31/2017 &12/31/2016&\text { Change }\\\text { Accounts Receivable } & \$ 270,000 & \$ 240,000 & \$ 30,000 \\\text { Inventory } & \$ 125,000 & \$ 100,000 & \$ 25,000 \\\text { Accounts Payable } & \$ 110,000 & \$ 90,000 & \$ 20,000\end{array}$

A)23.53 times
B)53.33 times
C)48.00 times
D)60.00 times

Question 21

ACME Inc.,a music publishing firm located in Tennessee,bills its clients on the first of the month.For example,any sale made in the month of July is billed August 1 and is due September 1.Clients traditionally pay as follows: 50% by the end of the first month (August),40% by the end of the second month (September),7% by the end of the third month (October),and 3% default on their bills.What is the total dollar value of first-quarter actual sales that will NOT be collected? $$\begin{array} { | l | l | l | l | l | l | } \hline & { \text { First-Quarter Actual Sales } } & && { \text { Second-Quarter Anticipated Sales } } \\\hline \text { January } & \text { February } & \text { March } & \text { April } & \text { May } & \text { June } \\\hline \$ 88,000 & \$ 74,000 & \$ 96,000 & \$ 99,000 & \$ 82,000 & \$ 63,000 \\\hline\end{array}$$

A)$2,900
B)$3,760
C)$5,160
D)$7,740

Question 22

Little Runabout Inc.makes small trailers for light-duty towing behind SUVs and small pickup trucks.Its trailers typically sell for $2,500.Many of its customers have asked for credit terms to aid in purchasing the trailers.The firm's finance department has estimated the following profile for its light-duty trailers and customer base: Annual sales: 12,000 trailers
Annual production costs per trailer: $1,500
Lost sales if credit is not provided for customers: 2,000 trailers
Default rate if all customers purchase on credit: 3.00%
What is the dollar value of bad debts the firm expects to accumulate over a year?

A)$9,250,000
B)$6,500,000
C)$540,000
D)$450,000

Question 23

Little Runabout Inc.makes small trailers for light-duty towing behind SUVs and small pickup trucks.Its trailers typically sell for $2,500.Many of its customers have asked for credit terms to aid in purchasing the trailers.The firm's finance department has estimated the following profile for its light-duty trailers and customer base: Annual sales: 12,000 trailers
Annual production costs per trailer: $1,500
Lost sales if credit is not provided for customers: 2,000 trailers
Default rate if all customers purchase on credit: 3.00%
What is the dollar value of bad debts the firm expects to accumulate over a year? Given this amount,what is the maximum average amount per unit sold that the firm should spend on credit screening?

A)$450,000; $37.50
B)$450,000; $45.00
C)$4,500,000; $450.00
D)$4,500,000; $$562.50

Question 24

ACME Inc.,has credit terms of 2/10 net 60.Customers should take the discount and pay in 10 days if they CANNOT earn more than ________ (APR)or ________ (EAR)on their investments.

A)14.90% APR or 15.89% EAR
B)15.89% APR or 14.90% EAR
C)12.42% APR or 13.08% EAR
D)13.08% APR or 12.42% EAR

Question 25

________ is the collective term used to describe a firm's decisions as to how customers will qualify for credit,what payment plan is allowed to creditors,and how overdue bills will be collected.

A)Credit history
B)Credit policy
C)Collection policy
D)Payment policy

Question 26

Estimating ________ is one part of managing short-term cash needs.The second part is estimating ________.

A)cash inflow; accounts payable
B)cash inflow; cash outflow
C)accounts receivable; cash outflow
D)accounts receivable; cash inflow

Question 27

Little Runabout Inc.makes small trailers for light-duty towing behind SUVs and small pickup trucks.Its trailers typically sell for $2,500.Many of its customers have asked for credit terms to aid in purchasing the trailers.The firm's finance department has estimated the following profile for its light-duty trailers and customer base: Annual sales: 10,000 trailers
Annual production costs per trailer: $1,500
Lost sales if credit is not provided for customers: 2,000 trailers
Default rate if all customers purchase on credit: 3.00%
What is the profit if the firm has a credit policy?

A)$25,000,000
B)$9,250,000
C)$450,000
D)$8,000,000

Question 28

ACME Inc.,a music publishing firm located in Tennessee,bills its clients on the first of the month.For example,any sale made in the month of July is billed August 1 and is due September 1.Clients traditionally pay as follows: 70% by the end of the first month (August),20% by the end of the second month (September),9% by the end of the third month (October),and 1% default on their bills.If accounts receivable are collected as anticipated,what is the last month in which January sales will be collected? $$\begin{array} { | l | l | l | l | l | l | } \hline & { \text { First-Quarter Actual Sales } } & && { \text { Second-Quarter Anticipated Sales } } \\\hline \text { January } & \text { February } & \text { March } & \text { April } & \text { May } & \text { June } \\\hline \$ 88,000 & \$ 74,000 & \$ 96,000 & \$ 99,000 & \$ 82,000 & \$ 63,000 \\\hline\end{array}$$

A)March
B)April
C)May
D)June

Question 29

Murphy's Repair has the following outstanding account receivables at the end of the month.The monthly late fee is 1.50% of the outstanding balance at the end of each billing month following the sale (February sales receive a late fee in April if not paid by March 31).Determine the total late fees due for the following. $\begin{array}{|l|l|l|l|l|l|}\hline\text { Invoice \# } & \text { Bill Date } & \text { Customer } & \text { Original } \$ & \text { Late Fees } \$ & \text { Current Date } \\\hline 6872 & 6 / 15 / 2017 & \text { RLO } & \$ 321.00 & & 9 / 30 / 2017 \\\hline 7100 & 6 / 25 / 2017 & \text { JBL } & \$ 417.00 & & 9 / 30 / 2017 \\\hline 7469 & 7 / 12 / 2017 & \text { DLL } & \$ 585.00 & & 9 / 30 / 2017\\\hline\end{array}$

A)$19.85
B)$31.08
C)$48.17
D)$0.00

Question 30

Little Runabout Inc.makes small trailers for light-duty towing behind SUVs and small pickup trucks.Its trailers typically sell for $2,500.Many of its customers have asked for credit terms to aid in purchasing the trailers.The firm's finance department has estimated the following profile for its light-duty trailers and customer base: $\begin{array}{ll}\text { Annual sales: } & 10,000 \text { trailers } \\\text { Annual production costs per trailer: } & \$ 1,500 \\\text { Lost sales if credit is not provided for customers: } & 2,000 \text { trailers } \\\text { Default rate if all customers purchase on credit: } & 3.00 \%\end{array}$ What is the profit if the firm has a cash-only policy?

A)$12,000,000
B)$25,000,000
C)$8,000,000
D)$10,000,000

Question 31

Little Runabout Inc.makes small trailers for light-duty towing behind SUVs and small pickup trucks.Its trailers typically sell for $2,500.Many of its customers have asked for credit terms to aid in purchasing the trailers.The firm's finance department has estimated the following profile for its light-duty trailers and customer base: $\begin{array}{ll}\text { Annual sales: } & 10,000 \text { trailers } \\\text { Annual production costs per trailer: } & \$ 1,500 \\\text { Lost sales if credit is not provided for customers: } & 2,000 \text { trailers } \\\text { Default rate if all customers purchase on credit: } & 3.00 \%\end{array}$ What is the change in the profit if the firm moves from a cash-only policy to a credit policy?

A)$1,250,000
B)$8,000,000
C)$9,250,000
D)$15,000,000

Question 32

ACME Inc.,has credit terms of 1/10 net 30.Customers should take the discount and pay in 10 days if they CANNOT earn more than ________ (APR)on their investments.

A)13.01%
B)20.13%
C)18.43%
D)12.29%

Question 33

Extending credit to a customer has three major components ________.

A)a policy on how customers will qualify for credit,a policy on the payment plan allowed creditors,and a policy for collecting overdue bills
B)a policy on how customers will qualify for credit,a policy on paying commissions on sales,and a policy for collecting overdue bills
C)a policy on how customers will qualify for credit,a policy on the payment plan allowed creditors,and a policy on accounting for depreciation
D)a policy on how customers will qualify for credit,a policy on accounting for depreciation,and a policy on paying commissions on sales

Question 34

Which of the following is a consideration when a company decides which customers should receive credit?

A)The amount of potential business from the customer
B)The credit policies of competing firms
C)The results of credit screening
D)All are considerations that the company takes into account.

Question 35

Murphy's Repair has the following outstanding account receivables at the end the month.Calculate the number of days late for each outstanding invoice. $$\begin{array} { | l | l | l | l | l | l | } \hline\text { Invoice \# } & \text { Bill Date } & \text { Customer } & \text { Due Date } & \text { Age of A/R } & \text { Current Date } \\\hline 6872 & 6 / 15 / 2017 & \text { RLO } & 7 / 15 / 2017 & & 9 / 30 / 2017 \\\hline 7100 & 6 / 25 / 2017 & \text { JBL } & 7 / 25 / 2017 & & 9 / 30 / 2017 \\\hline 7469 & 7 / 12 / 2017 & \text { DLL } & 8 / 12 / 2017 & & 9 / 30 / 2017 \\\hline\end{array}$$

A)71 days,61 days,and 16 days
B)76 days,66 days,and 48 days
C)75 days,65 days,and 48 days
D)77 days,67 days,and 49 days

Question 36

When a company deals only in cash,the cash conversion cycle becomes ________.

A)the collection cycle
B)the payable cycle
C)the production cycle
D)the collection cycle - the payable cycle

Question 37

ACME Inc.,bills its clients on the first of the month.For example,any sale made in the month of July is billed August 1 and is due September 1.Clients traditionally pay as follows: 70% by the end of the first month August),20% by the end of the second month (September),9% by the end of the third month (October),and 1% default on their bills.What is the dollar value of January billings collected in April? $$\begin{array} { | l | l | l | l | l | l | } \hline & { \text { First-Quarter Actual Sales } } & && { \text { Second-Quarter Anticipated Sales } } \\\hline \text { January } & \text { February } & \text { March } & \text { April } & \text { May } & \text { June } \\\hline \$ 88,000 & \$ 74,000 & \$ 96,000 & \$ 99,000 & \$ 82,000 & \$ 63,000 \\\hline\end{array}$$

A)$7,040
B)$7,920
C)$3,920
D)$0.00

Question 38

ACME Inc.,bills its clients on the first of the month.For example,any sale made in the month of July is billed August 1 and is due September 1.Clients traditionally pay as follows: 70% by the end of the first month (August),20% by the end of the second month (September),9% by the end of the third month (October),and 1% default on their bills.The firm's CEO wants to know the anticipated cash flow for April.Use the following information to estimate April cash flows. $$\begin{array} { | l | l | l | l | l | l | } \hline & { \text { First-Quarter Actual Sales } } & && { \text { Second-Quarter Anticipated Sales } } \\\hline \text { January } & \text { February } & \text { March } & \text { April } & \text { May } & \text { June } \\\hline \$ 88,000 & \$ 74,000 & \$ 96,000 & \$ 99,000 & \$ 82,000 & \$ 63,000 \\\hline\end{array}$$

A)$94,000
B)$81,600
C)$84,640
D)$89,920

Question 39

ACME Inc.,has credit terms of 2/15 net 45.Customers should take the discount and pay in 15 days if they CANNOT earn more than ________ (EAR)on their investments.

A)17.81%
B)27.86%
C)24.83%
D)16.55%

Question 40

The cash conversion cycle consists of three parts.List and define these three parts.How do they fit together to form the cash conversion cycle? You may answer this last question with a formula if you wish.

Question 41

Use the table below to answer the following questions about the Jetton Company.
Monthly Sales for the Jetton Company $$\begin{array} { | l | c | c | c | c | } \hline & \text { January } & \text { February } & \text { March } & \text { April } \\\hline \text { Sales } & 150,000 & 180,000 & 130,000 & 170,000 \\\hline ( \% ) \text { Cash Sales } & 18 \% & 26 \% & 24 \% & 19 \% \\\hline ( \% ) \text { Credit sales received } & & & & \\\text { when due in 30 days. } & 75 \% & 70 \% & 64 \% & 70 \% \\\hline ( \% ) \text { Credit sales received } & 7 \% & 4 \% & 12 \% & 11 \% \\\hline\end{array}$$

-Refer to the Monthly Sales for the Jetton Company.What is the average number of days to collect February sales for the Jetton Company?

A)45 days
B)30 days
C)23.4 days
D)19.75 days

Question 42

For positive interest rates,the EAR is greater than the APR when there are multiple compounding periods within the year.

Question 43

Use the table below to answer the following questions about the Jetton Company.
Monthly Sales for the Jetton Company $$\begin{array} { | l | c | c | c | c | } \hline & \text { January } & \text { February } & \text { March } & \text { April } \\\hline \text { Sales } & 150,000 & 180,000 & 130,000 & 170,000 \\\hline ( \% ) \text { Cash Sales } & 18 \% & 26 \% & 24 \% & 19 \% \\\hline ( \% ) \text { Credit sales received } & & & & \\\text { when due in 30 days. } & 75 \% & 70 \% & 64 \% & 70 \% \\\hline ( \% ) \text { Credit sales received } & 7 \% & 4 \% & 12 \% & 11 \% \\\hline\end{array}$$

-Refer to the Monthly Sales for the Jetton Company.What is the average number of days to collect April sales for the Jetton Company?

A)31.4 days
B)27.6 days
C)23.4 days
D)19.75 days

Question 44

When managing accounts receivable,a management goal is to slow down the receipt of future cash flows.

Question 45

When a business customer buys on credit from another business,the seller of the product will often offer an extended payment period for the product or service,but with an incentive to delay payment of the bill in an effort to earn a finance charge.

Question 46

To shorten the financing period of the collection cycle a firm can speed up receivables and speed up payments.

Question 47

Hardy Construction,has credit terms of 1/15 net 45.What is the implied APR and EAR of the firm's credit policy? What if the firm extends the discount to 30 days and the full payment to 60 days?

Question 48

Which of the following choices lists the least to most aggressive actions in the pursuit of overdue debt?

A)1)a collection agency,2)court action,3)a letter requesting overdue payment
B)1)court action,2)a collection agency,3)a letter requesting overdue payment
C)1)a letter requesting overdue payment,2)court action,3)a collection agency
D)1)a letter requesting overdue payment,2)a collection agency,3)court action

Question 49

MDU,A Michigan-based general contractor,bills its clients on the first of the month.Clients traditionally pay as follows: 60% pay by the end of the first month,30% by the end of the second month,7% by the end of the third month,and 3% default on their bills.For example,a $1.00 sale made in the month of July is billed August 1st and $0.60 is paid in August,etc.The firm's CEO wants to know the anticipated cash flow for the second quarter.Use the following information to estimate second-quarter cash flows.

Question 50

Float,from the buyer's perspective,is called ________ float and from the seller's perspective,is called ________ float.

A)financing; crediting
B)disbursement; collection
C)crediting; financing
D)collection; disbursement

Question 51

In terms of the float,the buyer of a product wants to ________ and the seller wants to ________.

A)increase the collection float; decrease the disbursement float
B)decrease the disbursement float; decrease the collection float
C)decrease the collection float; decrease the disbursement float
D)increase the disbursement float; decrease the collection float

Question 52

In order to shorten the financing period of the cash conversion cycle,a manager can speed up the collection period or slow down the payable cycle.

Question 53

Use the table below to answer the following questions about the Jetton Company.
Monthly Sales for the Jetton Company $$\begin{array} { | l | c | c | c | c | } \hline & \text { January } & \text { February } & \text { March } & \text { April } \\\hline \text { Sales } & 150,000 & 180,000 & 130,000 & 170,000 \\\hline ( \% ) \text { Cash Sales } & 18 \% & 26 \% & 24 \% & 19 \% \\\hline ( \% ) \text { Credit sales received } & & & & \\\text { when due in 30 days. } & 75 \% & 70 \% & 64 \% & 70 \% \\\hline ( \% ) \text { Credit sales received } & 7 \% & 4 \% & 12 \% & 11 \% \\\hline\end{array}$$

-Refer to the Monthly Sales for the Jetton Company.If Jetton were to shorten the amount of time firms have to pay their accounts receivable,then the firm's cash conversion cycle would be shortened.

Question 54

When collecting bad debts,a likely order of effort to collect would be to write a letter,followed by court action,followed by a collection agency.

Question 55

Labowski's Long Boards Inc.makes high-quality skateboards for recreational use.It wholesales its boards in groups of 10 for a package price of $1,500.Many of its customers have asked for credit terms to aid in purchasing the boards.The firm's finance department has estimated the following profile for its long boards and customer base:
Annual sales: 10,000 long board packages
Annual production costs per board package: $1,000
Lost sales if credit is not provided for customers: 1,200 long board packages
Default rate if all customers purchase on credit: 4.00%
What is the profit if the firm has a credit policy? What is the change in the profit if the firm moves from a cash-only policy to a credit policy? What is the dollar value of bad debts the firm expects to accumulate over a year? Given the bad-debt dollar amount,what is the maximum average amount per long board package that the firm should spend on credit screening?

Question 56

Use the table below to answer the following questions about the Jetton Company.
Monthly Sales for the Jetton Company $$\begin{array} { | l | c | c | c | c | } \hline & \text { January } & \text { February } & \text { March } & \text { April } \\\hline \text { Sales } & 150,000 & 180,000 & 130,000 & 170,000 \\\hline ( \% ) \text { Cash Sales } & 18 \% & 26 \% & 24 \% & 19 \% \\\hline ( \% ) \text { Credit sales received } & & & & \\\text { when due in 30 days. } & 75 \% & 70 \% & 64 \% & 70 \% \\\hline ( \% ) \text { Credit sales received } & 7 \% & 4 \% & 12 \% & 11 \% \\\hline\end{array}$$

-Refer to the Monthly Sales for the Jetton Company.If Jetton were to shorten the amount of time firms have to pay their accounts receivable,then the firm may lose some credit customers and lose sales.

Question 57

The company offering a discount on accounts payable is trying to ________ and the firm that pays on time rather than taking a discount is attempting to ________.

A)speed up cash outflow; slow down cash inflow
B)speed up cash inflow; slow down cash inflow
C)speed up cash inflow; slow down cash outflow
D)speed up cash outflow; slow down cash outflow

Question 58

When a company deals only in cash transactions (from its customers and to its creditors),the cash conversion cycle is only the production cycle.

Question 59

A company's future cash inflow from the sale of its products or services are called accounts payable.

Question 60

We call the process to identify good customers from bad customers credit screening.

Question 61

Many companies use lockboxes to speed up the delivery of the check at their bank.

Question 62

A ________ inventory item is an item that is not used in current operations but is serving a back-up role in case the current item fails during operation.

A)type C
B)redundant
C)reticent
D)beta generation

Question 63

EOQ equals ________.

A) $\left( \frac { 2 \times \mathrm { S } \times \mathrm { OC } } { \mathrm { CC } } \right)$ ÷ 2
B) $\sqrt { \frac { 2 + S + O C } { C C } }$
C) $\sqrt { 2 \times S \times O C }$ ÷ 2
D) $\sqrt { \frac { 2 \times \mathrm { S } \times \mathrm { OC } } { \mathrm { CC } } }$

Question 64

Which of the following does NOT reduce the length of time of collection float for a firm?

A)Electronic fund transfers (EFT)
B)Lockboxes
C)Direct payment via online checking
D)All of the above reduce the length of time of collection float for a firm.

Question 65

From the viewpoint of the payee,the delay between when a check is written and when the money actually leaves the account is called collection float.

Question 66

Electronic funds transfer (EFT)substantially reduces the collection float for businesses and the disbursement float for customers.

Question 67

An important objective of cash management is to lengthen the collection float and reduce the disbursement float.

Question 68

The time delay between when a check is written and when funds are available to the payee is called the float.

Question 69

When using the ABC Inventory Management System,Type A items are ________.

A)small-dollar items
B)nonessential inventory items
C)large-dollar or critical inventory items
D)moderate-dollar items

Question 70

TeeMeUp,an online retailer of t-shirts,orders 150,000 t-shirts per year from its manufacturer.The cost of ordering and delivery is $125 per order.If the firm orders 5,000 t-shirts in each order,what are the firm's total annual ordering costs (rounded to the nearest dollar)?

A)$3,750
B)$2,500
C)$1,500
D)$667

Question 71

Of the following,which is NOT an accurate statement about the EOQ model?

A)The actual cost of the inventory item is ignored.
B)Costs are divided into two categories: the cost of ordering and the cost of storage.
C)EOQ is an attempt to determine the appropriate level of inventory.
D)The EOQ assumes the sales rate fluctuates with seasonal changes.

Question 72

Total carrying cost equals ________.

A)the average carrying cost per item times the maximum level of inventory
B)the average carrying cost per item times the minimum level of inventory
C)the average carrying cost per item times the average level of inventory divided by 2
D)the average carrying cost per item times the average level of inventory

Question 73

An important objective of cash management is to ________ the disbursement float and ________ the collection float.

A)lengthen; reduce
B)lengthen; lengthen
C)reduce; reduce
D)reduce; lengthen

Question 74

The optimal order quantity as determined by the EOQ occurs when ________.

A)ordering costs equal carrying costs
B)ordering costs are exactly 1/2 of carrying costs
C)ordering costs are exactly twice as much as carrying costs
D)None of the answers provided is accurate.

Question 75

________ is the order quantity that minimizes total cost,and it is the result of trading off carrying costs and ordering costs.

A)Q/2
B)ABC
C)EOQ
D)None of the above

Question 76

What is a lockbox system for collecting accounts receivable,and how can it reduce a firm's collection float?

Question 77

Which of the following does NOT reduce the length of time of collection float for a firm?

A)Direct payment via online checking
B)The firm paying suppliers with a credit card
C)Lockboxes
D)Electronic fund transfers (EFT)

Question 78

Which of the following is NOT an inventory management technique?

A)ABC
B)6 SIGMA
C)JIT
D)EOQ

Question 79

Sportsman Warehouse,a large box store retailer of athletic shoes,orders 150,000 shoes per year from its manufacturer.If the firm orders 15,000 shoes in each order,and spends $6,000 in total annual ordering costs,what is the cost of ordering and delivery per order?

A)$6,000
B)$500
C)$600
D)There is not enough information to answer this question.

Question 80

EOQ focuses on the trade-off between ________.

A)carrying costs and delivery costs
B)seasonality and steady production
C)carrying costs and ordering costs
D)fixed and variable costs