Question 1

You invest $1,000 in a Canada Savings Bond.At the end of the first year you have $1,050, and at the end of the second year you have $1,100.00.This is an example of which of the following concepts?

Accepted Answer

A) Compound interest 
B) Simple interest 
C) Present value 
D) Changes in purchasing power

Question 2

Which of the following is an advantage of allowing customers to buy on credit?

Accepted Answer

A) It lengthens the cash cycle. 
B) It allows the company to claim bad debt expense. 
C) It increases sales. 
D) It allows the company to claim more tax refunds.

Question 3

Juan Gomez is a loans officer with the Canadian Bank.Yesterday Chris Anstey, the owner of Haines Meat Packing Ltd, met with Juan to discuss the possibility of Canadian Bank's opening up a $100,000 line of credit for the company to help with working capital management.Mr Anstey indicated that he would be willing to pledge his accounts receivable as security for the line of credit.Mr.Anstey presented Mr.Gomez with the following information related to the financial operations of Haines Meat Packing: $$\begin{array} { l r } 
\text { Current Assets } & \$ 450,000 \
\text { Inventory } & \$ 180,000 \
\text { Current Liabilities } & 400,000 \
\text { Average accounts receivable } & \$ 245,000 \
\text { Sales for 2008 } & \$ 1,250,000 \
\text { Percentage of sales on credit } & 75 \%
\end{array}$$ Mr.Gomez has done some research and discovered that similar businesses generally collect their accounts receivables within 45 days, have current ratios around 1.2 and quick ratios of .80.
Required:
A) Evaluate the liquidity of Haines Meat Packing.
B) Is there any other information you would like to have?
C) Assume the role of Juan Gomez; based on the information you do have, would you approve the line of credit? Explain your reasoning.

Accepted Answer

The answer of Juan Gomez is a loans officer with...

Question 4

Sam lent his son $30,000 to help finance his education.The son must pay back the principal, but no interest, in 6 years.If Sam could have earned 5% in a GIC over the same period, the cost of their gift to their son is closest to:

Accepted Answer

A) $1,500. 
B) $9,000. 
C) $10,146. 
D) $10,202.

Exam 6: Cash, Receivables, and the Time Value of Money

You invest $1,000 in a Canada Savings Bond.At the end of the first year you have $1,050, and at the end of the second year you have $1,100.00.This is an example of which of the following concepts?

Which of the following is an advantage of allowing customers to buy on credit?

Sam lent his son $30,000 to help finance his education.The son must pay back the principal, but no interest, in 6 years.If Sam could have earned 5% in a GIC over the same period, the cost of their gift to their son is closest to: