Deck 18: Short-Term Finance and Planning

Question 1

Which one of the following statements concerning the cash cycle is correct?

A)The cash cycle is equal to the operating cycle minus the inventory period.
B)The most desirable cash cycle is the one that has a small positive value.
C)Granting credit to slower paying customers tends to decrease the cash cycle.
D)The cash cycle plus the accounts receivable period is equal to the operating cycle.
E)A negative cash cycle is actually preferable to a positive cash cycle.

Answer 1

A negative cash cycle is actually preferable to a positive cash cycle.

Question 2

Which one of the following will increase net working capital? Assume the current ratio is positive.

A)Using cash to pay an accounts payable
B)Using cash to pay a long-term debt
C)Selling inventory at cost
D)Collecting an accounts receivable
E)Using a long-term loan to buy inventory

Answer 2

Using a long-term loan to buy inventory

Question 3

Which of the following could be the cause of a lengthening cash cycle?

A)Increasing the inventory turnover
B)Issuing credit to less credit-worthy customers than in previous periods
C)Increasing the accounts payable period
D)Extending the time period before paying a supplier for a credit purchase
E)Offering customers cash discounts for prompt payment

Answer 3

Issuing credit to less credit-worthy customers than in previous periods

Question 4

For a levered firm,an additional 3-day delay in paying suppliers will

A)reduce the firm's long-term external financing need.
B)increase the firm's stock-out costs.
C)increase the cash cycle by 3 days.
D)reduce the operating cycle by 3 days.
E)not affect the cash cycle.

Question 5

Flexible short-term financial policies tend to

A)support few investments in marketable securities.
B)maintain large cash balances.
C)tightly restrict credit sales.
D)maintain low accounts receivable balances.
E)minimize the investment in inventory.

Question 6

Which one of the following actions will tend to increase the accounts receivable period?

A)Increasing the finance charges applied to all customer balances outstanding over 30 days
B)Increasing the discount for early payment by credit customers
C)Granting discounts for cash sales
D)Loosening the standards for granting credit to customers
E)Refusing credit to all existing and future customers

Question 7

Which one of the following will increase the cash cycle?

A)Increasing the cash discounts given to customers who pay their accounts early
B)Having a larger percentage of customers paying with cash instead of credit
C)Paying your suppliers earlier to receive the discount they offer
D)Buying less raw materials to have on hand
E)Ordering raw materials inventory only when you need it rather than ahead of time

Question 8

If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales,the operating cycle will

A)increase due to the increased receivables turnover rate.
B)decrease because the number of days' sales in receivables will decrease.
C)remain constant because credit sales are constant.
D)remain constant because the accounts receivable and inventory periods will be constant.
E)remain constant because cash collections affect the cash cycle,not the operating cycle.

Question 9

Which one of the following is a source of cash?

A)An increase in inventory
B)An increase in fixed assets
C)A decrease in long-term debt
D)The payment of a cash dividend
E)A decrease in accounts receivable

Question 10

An increase in which one of the following will decrease the cash cycle,all else equal?

A)Payables turnover
B)Days sales in inventory
C)Operating cycle
D)Inventory turnover rate
E)Accounts receivable period

Question 11

Which one of these managers is most apt to determine which supplier should be used as the source of a production material?

A)Marketing manager
B)Cash manager
C)Purchasing manager
D)Controller
E)Production manager

Question 12

Which one of the following is a use of cash?

A)Acquisition of bank loan
B)Sale of common stock
C)Sale of marketable securities
D)Decrease in accounts payable
E)Decrease in inventory

Question 13

Which one of the following will increase the net working capital of a firm? Assume the current ratio is positive.

A)Selling a fixed asset
B)Selling inventory at cost for cash
C)Making a payment on a long-term debt
D)Buying inventory on credit
E)Paying an accounts payable

Question 14

ABC historically acquired products that were held in inventory until they could be sold to a customer.The firm is now changing its policy and will only acquire a product when it receives an actual order from a customer.All else equal,this change will

A)increase the operating cycle.
B)shorten the accounts payable period.
C)lengthen the accounts receivable period.
D)decrease the cash cycle.
E)decrease the inventory turnover rate.

Question 15

Which one of the following will decrease the operating cycle?

A)Decreasing the speed at which inventory is sold
B)Decreasing the accounts receivable turnover rate
C)Decreasing the cash cycle by increasing the accounts payable period
D)Decreasing the accounts payable period
E)Decreasing the days' sales in inventory

Question 16

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

A)The cash cycle starts when inventory is purchased.
B)The longer the cash cycle,the more likely a firm will need external financing.
C)Increasing the accounts payable period increases the cash cycle.
D)The cash cycle can exceed the operating cycle if the payables period is equal to zero.
E)Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.

Question 17

A restrictive short-term financial policy tends to

A)grant credit to more customers.
B)reduce total ordering costs as compared to a more flexible policy.
C)encourage credit sales over cash sales.
D)incur more carrying costs than a flexible policy does.
E)reduce future sales more so than a flexible policy.

Question 18

Which one of these managers is most apt to post customer payments to their accounts?

A)Credit manager
B)Controller
C)Cash manager
D)Marketing manager
E)Payables manager

Question 19

The cash cycle includes the time period between the time when

A)inventory is sold and the cash from that sale is received.
B)inventory is purchased and the cash from the sale of that inventory is received.
C)inventory is purchased and when the cash for that purchase is paid to the supplier.
D)the bill for the inventory purchase is received and the payment is made to the supplier.
E)the bill for the inventory is paid and the money from the sale of that inventory is received.

Question 20

Which one of the following will decrease the operating cycle?

A)Paying accounts payable faster
B)Discontinuing the discount given for early payment of an accounts receivable
C)Decreasing the inventory turnover rate
D)Collecting accounts receivable faster
E)Increasing the accounts payable turnover rate

Question 21

A flexible short-term financial policy

A)increases the likelihood that a firm will face financial distress.
B)increases the probability that a firm will earn high returns on all of its assets.
C)advocates a smaller investment in net working capital than a restrictive policy does.
D)utilizes short-term financing to fund all of the firm's assets.
E)incurs an opportunity cost due to the rate of return that applies to short-term assets.

Question 22

A prearranged credit agreement with a bank typically open for two or more years is called a

A)letter of credit.
B)revolving credit arrangement.
C)compensating balance.
D)factored loan.
E)cleanup loan.

Question 23

A restrictive short-term financial policy is most associated with both

A)liberal credit terms and large investments in marketable securities.
B)minimal cash balances and large investments in marketable securities.
C)large investments in inventory and accounts receivable.
D)minimal cash balances and credit sales.
E)high credit sales and high cash balances.

Question 24

A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a

A)rollover.
B)cleanup loan.
C)letter of credit.
D)factored loan.
E)compensating balance.

Question 25

A short-term loan where the borrower pledges its accounts receivable as security but is still responsible for any uncollectible account is referred to as

A)a compensating balance.
B)a letter of credit.
C)an assignment.
D)factoring.
E)a repurchase.

Question 26

Which financial policy,or policies,uses both marketable securities and short-term financing to fund seasonal variations in asset needs?

A)Both the flexible and the compromise financial policies
B)Flexible financial policy only
C)Compromise financial policy only
D)Restrictive financial policy only
E)Both the restrictive and the compromise financial policies

Question 27

Which one of the following statements is correct?

A)A farmer generally uses a type of financing that employs trust receipts to provide financing during the growing season.
B)Floor plan arrangements are most applicable to large,easily identifiable types of inventory.
C)A drug store is more apt to have a financing arrangement involving trust receipts than one involving a blanket lien.
D)A third-party inventory manager is generally involved with the lender and the borrower in a floor plan arrangement.
E)A direct loan from a bank is generally less expensive than a loan involving commercial paper.

Question 28

The primary difference between a line of credit and a revolving credit arrangement is the

A)length of the time period covered by the loan agreement.
B)type of collateral used to secure the loan.
C)fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured.
D)fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured.
E)fact that the revolving credit arrangement requires a cleanup period but the line of credit does not.

Question 29

A flexible short-term financial policy

A)is associated with firms where the carrying costs are considered to be less than the shortage costs.
B)applies mostly to firms that factor their accounts receivable.
C)applies only to firms that strictly limit their credit sales.
D)tends to decrease the amount of current assets held by a firm.
E)is designed to utilize short-term external financing to fund seasonal increases in current assets.

Question 30

Your firm collects 20 percent of sales in the month of sale,65 percent of sales in the month following the month of sale,and 13 percent of sales in the second month following the month of sale.The remainder of the sales are uncollectible.Given this,you will collect ________ sales during the month of May.

A)65 percent of May
B)20 percent of March
C)13 percent of May
D)65 percent of March
E)13 percent of March

Question 31

A manufacturing firm has a 90-day collection period.The firm produces seasonal merchandise and thus has the least sales during the first quarter of a year and the highest level of sales during the third quarter of a year.The firm maintains a relatively steady level of production which,means that its cash disbursements are fairly equal in all quarters.Assume all other disbursements are also equal throughout the year.Assume a 360-day year.The firm is most apt to face a cash-out situation in

A)the first quarter.
B)the second quarter.
C)the third quarter.
D)the fourth quarter.
E)any quarter,equally.

Question 32

Which one of these statements is correct?

A)A firm might be able to charge higher prices if it switches from a flexible to a restrictive short-term financial policy.
B)If a firm adopts a restrictive short-term financial policy,its current assets will be greater than if it adopts a flexible policy.
C)If a firm switches from a flexible short-term financial policy to a restrictive policy,it is likely to see an increase in its uncollectible accounts receivable.
D)If a firm switches from a restrictive short-term financial policy to a flexible policy,its operating cycle will most likely decrease.
E)Future cash flows are expected to be higher if a firm adopts a flexible,rather than a restrictive,short-term financial policy.

Question 33

A type of short-term loan where the borrower sells its accounts receivables to the lender at a discount to face value is called

A)a compensating balance.
B)an assignment.
C)a letter of credit.
D)factoring.
E)a bond.

Question 34

Southern Markets has an accounts receivable period of 30 days.In the first quarter of a calendar year,the firm's accounts receivable collections will equal its credit sales for the months of:

A)December,January,and February.
B)January,February,and March.
C)February,March,and April.
D)February and March.
E)January and February.

Question 35

The total sum of the carrying costs and the shortage costs will be lowest at the point where

A)both the carrying costs and the shortage costs are minimized.
B)the carrying costs exceed the shortage costs.
C)the carrying costs equal the shortage costs.
D)both the carrying costs and the shortage costs are maximized.
E)the shortage costs exceed the carrying costs.

Question 36

A compensating balance
I.is required when a firm acquires bank financing other than a line of credit.
II.increases the cost of short-term bank financing.
III.represents an opportunity cost to the lending institution.
IV.is often used as a means of paying for banking services received.

A)I and III only
B)II and IV only
C)II and III only
D)I and IV only
E)I,II,and IV only

Question 37

A restrictive short-term financial policy,as compared to a more flexible policy,tends to increase

A)the probability that a firm will face a cash-out situation.
B)the sales of a firm due to the firm's credit availability and terms.
C)sales due the large amount of inventory on hand.
D)accounts receivable.
E)the ability of a firm to charge premium prices.

Question 38

Shortage costs include

A)all costs that increase with increased current assets.
B)production stoppages due to lack of materials and also lost customer goodwill.
C)increased sales due to inventory selection and increased order costs.
D)increased insurance costs on inventory and an increased rate of return on assets.
E)increased uses of cash for net working capital and stockouts.

Question 39

The most common means of financing a temporary cash deficit is a

A)short-term issue of corporate bonds.
B)short-term secured bank loan.
C)short-term unsecured bank loan.
D)long-term unsecured bank loan.
E)long-term secured bank loan.

Question 40

A monthly cumulative cash deficit indicates that a firm

A)is facing long-term financial distress.
B)will go out of business within the year.
C)is using its cash wisely.
D)is capable of funding all of its needs internally.
E)has at least a short-term need for external funding.

Question 41

Under which type of credit arrangement does a public warehouse act as a control agent?

A)Blanket inventory liens
B)Factored liens
C)Trust receipt financing
D)Field warehouse financing
E)Commercial paper arrangements

Question 42

Martinique's Boutique has a 45-day collection period.Sales for the next four quarters are estimated at $1,500,$1,600,$2,100,and $1,900,respectively,starting with the first quarter of the year.Given this information,which one of the following statements is correct? Assume a 360-day year.

A)The firm will collect $1,575 in Quarter 2.
B)The accounts receivable balance at the beginning of Quarter 4 will be $950.
C)The firm will collect $750 from Quarter 2 sales in Quarter 3.
D)The firm will have an accounts receivable balance of $950 at the end of the year.
E)The firm will collect a total of $2,100 in Quarter 4.

Question 43

Bruceton Farms currently has an operating cycle of 76.3 days.The firm is analyzing some operational changes that are expected to decrease the accounts receivable period by 2.8 days and decrease the inventory period by 3.1 days.The accounts payable turnover rate is expected to increase from seven to eight times per year.If all of these changes are adopted,what will be the firm's new operating cycle?

A)68.7 days
B)61.3 days
C)54.9 days
D)70.4 days
E)76.2 days

Question 44

Smiley and Sons has an inventory period of 42 days,an accounts payable period of 33 days,and an accounts receivable period of 38 days.Management is considering offering a 2 percent discount if its credit customers pay for their purchases within 10 days.If the new discount is offered,the accounts receivable period is expected to decline by 19 days.If the new discount is offered,the cash cycle will change from ________ days to ________ days.

A)47; 28
B)80; 61
C)80; 28
D)61; 47
E)61; 28

Question 45

A firm has an inventory turnover rate of 15.2,a receivables turnover rate of 16.8,and a payables turnover rate of 12.7.How long is the operating cycle?

A)39.19 days
B)45.74 days
C)42.87 days
D)33.08 days
E)53.37 days

Question 46

Brooke Industries has sales of $938,000 and cost of goods sold of $468,000.The firm had a beginning inventory of $124,600 and an ending inventory of $132,900.What is the length of the inventory period?

A)114.67 days
B)105.21 days
C)84.56 days
D)100.41 days
E)121.59 days

Question 47

Blackwell Co.has credit sales of $317,428,costs of goods sold of $151,217,and average accounts receivable of $28,744.How long on average does it take the firm's credit customers to pay for their purchases?

A)27.99 days
B)33.05 days
C)38.23 days
D)31.37 days
E)29.95 days

Question 48

Candy Corner has an inventory turnover rate of 14.6,an accounts payable period of 43.7 days,and an accounts receivable period of 32.4 days.What is the length of the cash cycle?

A)14.2 days
B)11.8 days
C)12.1 days
D)17.3 days
E)13.7 days

Question 49

Pat's Place has sales of $613,700 and cost of goods sold of $338,514.At the beginning of the year,inventory was $56,509.At the end of the year,the inventory balance was $52,411.What is the inventory turnover rate?

A)5.23 times
B)7.56 times
C)6.22 times
D)5.60 times
E)6.87 times

Question 50

A supplier offers credit terms of 2/15,net 45.This means that

A)a 2 percent surcharge will be added to any invoice not paid within 15 days.
B)all purchases must be paid in full within 30 days.
C)a monthly interest rate equal to 2/15^ths of one percent will be added to any invoice not paid within 45 days.
D)a 2 percent discount can be taken if a purchase is paid within 15 days with the full amount due in 45 days.
E)2 percent of the invoice must be paid within 15 days with the balance paid within 45 days.

Question 51

Assume you are completing a short-term financial plan spreadsheet.The cumulative surplus will be equal to the

A)ending cash balance minus the minimum cash balance plus the change in short-term debt.
B)minimum cash balance plus the ending cash balance.
C)ending cash balance plus the beginning short-term borrowing plus the change in short-term debt.
D)ending cash balance minus the minimum cash balance.
E)ending cash balance.

Question 52

Dwyer Metals has an inventory turnover of 16 and an accounts receivable turnover of 10.The accounts payable period is 51 days.What is the length of the operating cycle?

A)59.31 days
B)62.57 days
C)51.84 days
D)65.03 days
E)52.79 days

Question 53

HM Industries has a beginning receivables balance on January 1^st of $484.Sales for January through April are $420,$364,$390,and $433,respectively.The accounts receivable period is 60 days.How much did the firm collect in the month of April? Assume a 360-day year.

A)$420
B)$364
C)$377
D)$390
E)$392

Question 54

The Down Towner has sales of $748,320 and average accounts payable of $128,209.The cost of goods sold is equivalent to 62 percent of sales.How long does it take the company to pay its suppliers?

A)74.07 days
B)93.45 days
C)79.69 days
D)100.86 days
E)89.85 days

Question 55

A firm has sales of $914,700.The cost of goods sold is equal to 61 percent of sales.The firm has an average inventory of $108,200.How many days on average does inventory sit on the shelf prior to being sold?

A)52.31 days
B)76.90 days
C)65.29 days
D)70.78 days
E)43.18 days

Question 56

A firm currently has a 29.3-day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2.7 days,increases its inventory period by 1.4 days,and decreases its payables period by 2.4 days.What will the length of the cash cycle be after these changes?

A)32.5 days
B)33.2 days
C)35.6 days
D)30.4 days
E)39.1 days

Question 57

Super Mart has sales of $542,300.The cost of goods sold is equal to 59 percent of sales.The beginning accounts receivable balance is $86,534,and the ending accounts receivable balance is $84,209.How long on average does it take the firm to collect its receivables?

A)57.46 days
B)66.08 days
C)39.19 days
D)43.92 days
E)49.11 days

Question 58

Smith and Johnson have expected sales of $427,$489,$626,and $738 for the months of January through April,respectively.The accounts receivable period is 15 days.How much did the firm collect in the month of April? Assume a 360-day year.

A)$626
B)$558
C)$738
D)$313
E)$682

Question 59

D&M sells its inventory in 67 days on average.Their customers generally charge their purchases on a credit card with payment being received in 2 days.The company takes 61 days on average to pay for its purchases.Given this information,what is the length of the company's cash cycle?

A)42 days
B)36 days
C)13 days
D)17 days
E)8 days

Question 60

True Blue Stores had a beginning accounts payable balance of $87,300 and an ending accounts payable balance of $79,460.Sales for the period were $702,000,and costs of goods sold were $423,600.What is the payables turnover rate?

A)6.98 times
B)5.08 times
C)8.23 times
D)9.28 times
E)7.01 times

Question 61

Smithfield's has a line of credit with a local bank of $75,000.The loan agreement calls for interest of 6 percent with a compensating balance requirement of 3 percent that is based on the total amount borrowed.What is the effective interest rate if the firm needs $58,000 for 1 year to finance a fixed asset purchase?

A)8.55%
B)6.34%
C)7.13%
D)7.38%
E)6.19%

Question 62

Dewey's expects sales of $780,$830,$870,and $790 for the months of April through July,respectively.The firm collects 31 percent of sales in the month of sale,63 percent in the month following the month of sale,and 5 percent in the second month following the month of sale.The remaining 1 percent of sales is never collected.How much money does the firm expect to collect in the month of June?

A)$831.60
B)$801.40
C)$808.20
D)$788.20
E)$852.40

Question 63

Baker Industries has a 30-day accounts receivable period.The estimated quarterly sales for this year,starting with the first quarter,are $1,450,$1,620,$1,740,and $2,250,respectively.How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.

A)$2,010
B)$1,980
C)$2,080
D)$1,960
E)$2,120

Question 64

Jupiter stores had a Quarter 2 beginning cash balance of $647.Sales for Quarters 1 through 3 are estimated at $800,$950,and $1,200,respectively.The cost of goods sold is equal to 59 percent of sales.Goods are purchased one quarter prior to the month of sale.The accounts payable period is 30 days,and the accounts receivable period is 15 days.The firm had quarterly cash expenses of $210.What was the cash balance at the end of Quarter 2? Assume a 360-day year.

A)$674.47
B)$666.67
C)$703.17
D)$719.39
E)$680.00

Question 65

Prudoe Fuels factors its accounts receivable immediately at a discount of 1.65 percent.The average collection period is 43 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

A)14.97%
B)15.17 %
C)16.09%
D)16.67%
E)18.51%

Question 66

A supplier offers you credit terms of 1/5,net 20.What is the cost of forgoing the discount on a purchase of $1,250? Assume a 365-day year.

A)34.21%
B)37.79%
C)29.03%
D)32.33%
E)44.32%

Question 67

Dixie's has a net cash inflow for the quarter of -$108.The beginning cash balance is $212.Company policy is to maintain a minimum cash balance of $75 and borrow only the amount that is necessary to maintain that balance.How much does the firm need to borrow to have a zero cumulative surplus?

A)$0
B)$104
C)$179
D)$132
E)$29

Question 68

On April 1^st,a firm had a beginning cash balance of $239.March sales were $474 and April sales were $463.During April,the firm had cash expenses of $135 and payments on accounts payable of $212.The accounts receivable period is 30 days.What is the firm's beginning cash balance on May 1^st? Assume a 360-day year.

A)$397
B)$366
C)$419
D)$382
E)$355

Question 69

Upstate Farms factors its accounts receivable immediately at a discount of 2.5 percent.The average collection period is 39 days.Assume all accounts are collected in full.What is the effective annual interest rate on this arrangement? Assume a 365-day year.

A)29.97%
B)26.74 %
C)30.78%
D)27.90%
E)28.33%

Question 70

Snow Mountain Resort had a beginning cash balance of $9,720 for the quarter.During the quarter,the firm had cash collections of $157,311,wages and other cash expenses of $67,900,payments on account of $57,412,and dividends paid of $2,500.The minimum cash balance was just set at $1,200.The beginning short-term debt is $28,000 with a quarterly interest rate of 1.4 percent.At quarter end,the cumulative surplus (deficit)is ________ and the ending short-term debt is ________.

A)$0; $0
B)$0; $1,892
C)$0; $9,627
D)$1,892; $0
E)$9,627; $0

Question 71

Midwest Meats has a net cash inflow,excluding long-term financing expenses,for the quarter of $248.The minimum and beginning cash balance is $300,and the firm has $2,300 in short-term debt.The quarterly interest on the loan is $37.How much does the firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus for the quarter?

A)Repay $89
B)Borrow and repay $0
C)Repay $211
D)Borrow $89
E)Repay $164

Question 72

Duke's Auto Parts has a beginning receivables balance on January 1^st of $398.Quarterly sales for the year are $427,$502,$479,and $525,starting with the first quarter.The accounts receivable period is 60 days.How much did the firm collect in the second quarter? Assume a 360-day year.

A)$458.50
B)$452.00
C)$477.00
D)$464.50
E)$479.50

Question 73

Toni's has a net cash inflow,excluding long-term financing expenses,for the quarter of $418.02.The beginning cash balance is $187.40.The firm has $546 in short-term debt with a quarterly interest rate of 1.2 percent.New company policy is to maintain a minimum cash balance of $140.How much does the firm need to borrow or how much can it repay on its loan to have a zero cumulative surplus for the quarter?

A)Borrow $458.87
B)Borrow $276.69
C)Repay $465.42
D)Repay $458.87
E)Repay $308.19

Question 74

As of the beginning of the quarter,a firm has a cash balance of $318.During the quarter,the firm pays its suppliers $297 and collects $398 from customers.It also pays an interest payment of $32 and a tax bill of $164.In addition,the firm borrows $125.What is the cash balance at the end of the quarter?

A)$98
B)$145
C)$253
D)$348
E)$305

Question 75

Weisbro and Sons purchases its inventory one quarter prior to the quarter of sale.The purchase price is 57 percent of the sales price.The accounts payable period is 60 days.The accounts payable balance at the beginning of Quarter 1 is $27,500.Sales for Quarters 1 through 4 are expected to be $46,400,$51,900,$57,800,and $62,500,respectively.What is the amount of the expected disbursements for Quarter 3? Assume a 360-day year.

A)$29,202
B)$30,451
C)$33,839
D)$28,800
E)$31,407

Question 76

Birds Unlimited has a 45-day accounts payable period.The firm has expected sales for Quarters 1 through 4 of next year of $2,240,$2,650,$2,820,and $2,700,respectively.The cost of goods sold for a quarter is equal to 58 percent of the next quarter's sales.What is the amount of the projected cash disbursements for accounts payable for Quarter 3? Assume a 360-day year.

A)$2,825.50
B)$1,600.80
C)$1,690.30
D)$1,725.50
E)$2,760.00

Question 77

The Babco Co.has a $225,000 line of credit with an interest rate of 6.5 percent and a compensating balance requirement of 4 percent that is based on the total amount borrowed.What is the effective interest rate if the firm needs $163,000 to finance some expenses? The company plans on repaying the loan in a lump sum at the end of 1 year.

A)7.20%
B)7.27%
C)7.08%
D)5.80%
E)6.77%

Question 78

Buster's had a beginning cash balance of $2,780 for the quarter.During the quarter,the firm had cash collections of $41,309,wages and other cash expenses of $18,800,payments on account of $21,308,and dividends paid of $1,200.The beginning short-term debt is $6,800 with a quarterly interest rate of 2 percent.The firm just adopted a new policy which sets the minimum cash balance at $600.At quarter end,the cumulative surplus (deficit)is ________ and the ending short-term debt is ________.

A)$0; $6,800
B)$0; $4,755
C)$0; $4,891
D)$1,892; $4,891
E)$2,045; $4,755

Question 79

A supplier offers you credit terms of 2/10,net 45.What is the cost of forgoing the discount on a purchase of $318,600? Assume a 365-day year.

A)20.41%
B)21.08%
C)24.83%
D)22.69%
E)23.45%