Question 1

The inventory period is equal to:

Accepted Answer

A)  the inventory turnover rate divided by 365
B)  sales divided by the average inventory divided into 365
C)  sales divided by the average inventory multiplied by 365
D)  365 multiplied by the average inventory divided by the cost of goods sold
E)  the cost of goods sold divided by the inventory turnover rateF) B) and C)
G) C) and E)

Question 2

Moore & Moore has just finished projecting its expected cash receipts and expenditures for next year.What is this projection called?

Accepted Answer

A)  cash budget
B)  balance sheet
C)  receivables schedule
D)  compromise policy
E)  operating projectionF) A) and D)
G) A) and C)

Question 3

The operating cycle is equal to which one of the following?

Accepted Answer

A)  inventory period minus the accounts payable period plus the accounts receivable period
B)  inventory period plus the accounts payable period
C)  inventory period plus the cash cycle
D)  accounts receivable period plus the inventory period
E)  accounts receivable period plus the cash cycleF) None of the above
G) C) and D)

Question 4

Baker Industries offers credit terms of 2/20,net 60 to Charlie Co.Charlie Co.has an inventory period of 15 days and an operating cycle of 45 days.Given this,which of the following statements are correct?
I.The credit terms of Baker Industries are too restrictive.
II.If Charlie Co.forgoes the discount on its purchases,it will have a negative cash cycle.
III.Baker Industries is financing the accounts receivable of Charlie Co.
IV.If Charlie Co.is delinquent in its payment,Baker Industries should be concerned.

Accepted Answer

A)  I,III and IV only
B)  I and II only
C)  I,II,III and IV
D)  II,III and IV only
E)  III and IV onlyF) C) and E)
G) All of the above

Question 5

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will have?
I.uncollectable accounts receivables
II.work stoppages for lack of raw materials
III.carrying costs
IV.obsolete or out-of-date inventory

Accepted Answer

A)  I,III and IV only
B)  I and II only
C)  I,II and III only
D)  II and III only
E)  III and IV onlyF) A) and B)
G) None of the above

Question 6

Which one of the following statements related to a cash budget is correct?

Accepted Answer

A)  The cumulative surplus is computed prior to adjusting for the minimum cash balance.
B)  Financially healthy firms can have a negative quarterly net cash inflow.
C)  Firms generally set the minimum cash balance at zero for planning purposes.
D)  Capital expenditures are treated as a cash inflow on a cash budget.
E)  A positive net cash inflow for a period indicates the cash disbursements exceed the cash collections for the period.F) C) and E)
G) All of the above B

Question 7

Which one of the following best describes a line of credit?

Accepted Answer

A)  long-term prearranged,committed bank loan
B)  short-term prearranged bank loan that can be either committed or noncommitted
C)  short-term loan secured by accounts receivable
D)  long-term,prearranged,noncommitted bank loan
E)  short-term loan secured by inventoryF) A) and C)
G) A) and E)

Question 8

Which one of the following commences on the day inventory is purchased and ends on the day the payment for that inventory is collected? Assume all sales and purchases are on credit.

Accepted Answer

A)  operating cycle
B)  accounts receivable period
C)  cash cycle
D)  accounts payable period
E)  inventory periodF) B) and E)
G) A) and B)

Question 9

Which of the following are inversely related to increases in a firm's current assets?
I.re-order costs
II.shortage costs
III.restocking costs
IV.carrying costs

Accepted Answer

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

Question 10

Which one of the following is directly related to increases in a firm's current assets?

Accepted Answer

A)  carrying costs
B)  re-order costs
C)  restocking costs
D)  out-of-stock events
E)  shortage costsF) A) and B)
G) None of the above

Question 11

The Windslow Co.has the following estimated sales:
Sales
Purchases are equal to 55 per cent of the following quarter's sales.What is the amount of anticipated purchases which will be made in the third quarter?

Accepted Answer

A)  $810
B)  $990
C)  $900
D)  $770
E)  $1,030F) B) and E)
G) B) and C) B

Question 12

Which one of the following statements is correct?

Accepted Answer

A)  Firms should generally finance all of their assets with long-term debt.
B)  A firm is less apt to face financial distress if it adopts a flexible financial policy rather than a restrictive policy.
C)  Short-term borrowing is generally more expensive than long-term borrowing.
D)  Long-term interest rates tend to be more volatile than short-term interest rates.
E)  Firms that follow restrictive financial policies can generally avoid short-term debt financing.F) C) and D)
G) A) and E)

Question 13

Which one of the following actions will decrease the operating cycle?

Accepted Answer

A)  granting customers more time to pay for their credit purchases
B)  increasing inventory
C)  paying suppliers faster
D)  buying more inventory with cash rather than with credit
E)  lessening the production time needed to manufacture a good for saleF) A) and B)
G) A) and D)

Question 14

Which of the following are sources of cash?
I.decreasing accounts receivable
II.increasing inventory
III.increasing accounts payable
IV.increasing common stock

Accepted Answer

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

Question 15

Tri-City Grocers is a chain of grocery stores that just hired a new CFO.Which of the following actions would you expect this CFO to adopt given her statement that she wants to implement a more flexible financing policy for the firm?
I.easing the credit terms given to customers
II.increasing the amount of inventory carried by each grocery store
III.borrowing funds to keep more cash available for store operations
IV.decreasing the firms' investments in marketable securities

Accepted Answer

A)  I,II,III and IV
B)  I and III only
C)  I,II and III only
D)  II and IV only
E)  II,III and IV onlyF) All of the above
G) B) and C)

Question 16

Which one of the following statements concerning a firm's sources and uses of cash is correct given the following account values?

Accepted Answer

A)  The long-term debt is a use of cash of $200.
B)  The accounts receivable is a use of cash of $50.
C)  The common stock is a source of cash of $200.
D)  The accounts payable is a source of cash of $200.
E)  The inventory is a source of cash of $100.F) A) and D)
G) D) and E)

Question 17

Which one of the following is most indicative of a flexible short-term financial policy?

Accepted Answer

A)  relatively low level of liquidity
B)  high ratio of current assets to sales
C)  low level of net working capital
D)  high ratio of short-term debt to long-term debt
E)  relatively small investment in current assetsF) A) and B)
G) C) and E)

Question 18

Allison Adventures has the following estimated sales:
Sales
Purchases are equal to 65 per cent of the following quarter's sales.The accounts receivable period is 30 days and the accounts payable period is 45 days.Assume that there are 30 days in each month.Allison Adventures will purchase _____ of goods in the third quarter and pay their suppliers _____ during the third quarter.

Accepted Answer

A)  $2080;$2178
B)  $1885;$2178
C)  $2275;$2178
D)  $1885;$1983
E)  $2080;$1983F) B) and E)
G) All of the above

Question 19

A committed line of credit:

Accepted Answer

A)  is a loan arrangement for a stated period of time which is free of all costs and fees other than the actual interest paid on the funds borrowed.
B)  provides greater assurance than a noncommitted credit line that funds will be available when needed by a firm.
C)  guarantees that any funds borrowed during a stated period of time will be charged the lowest rate of interest the lending bank offers to any of its customers.
D)  guarantees that a set amount of funds will be available to a firm for a stated period of time regardless of events that might occur during that time period.
E)  is a guarantee that a bank will purchase a firm's accounts receivables at full value.F) None of the above
G) A) and B)

Question 20

The __________ facility is a major source of short-term finance for a corporation.It allows the company,without any previous notice,to put its bank account into ______,up to an agreed limit.

Accepted Answer

A)  promissory notes rollover;deficit
B)  overdraft;deficit
C)  commercial bills rollover;surplus
D)  revolving;deficit
E)  revolving;surplusF) D) and E)
G) All of the above

Exam 16: Short-Term Financial Planning

The inventory period is equal to:

Correct Answer
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Moore & Moore has just finished projecting its expected cash receipts and expenditures for next year.What is this projection called?

Correct Answer
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The operating cycle is equal to which one of the following?

Correct Answer
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Correct Answer
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A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will have? I.uncollectable accounts receivables II.work stoppages for lack of raw materials III.carrying costs IV.obsolete or out-of-date inventory

Correct Answer
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Which one of the following statements related to a cash budget is correct?

Correct Answer
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B

Which one of the following best describes a line of credit?

Correct Answer
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Which one of the following commences on the day inventory is purchased and ends on the day the payment for that inventory is collected? Assume all sales and purchases are on credit.

Correct Answer
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Which of the following are inversely related to increases in a firm's current assets? I.re-order costs II.shortage costs III.restocking costs IV.carrying costs

Correct Answer
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Which one of the following is directly related to increases in a firm's current assets?

Correct Answer
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The Windslow Co.has the following estimated sales: Sales Purchases are equal to 55 per cent of the following quarter's sales.What is the amount of anticipated purchases which will be made in the third quarter?

Correct Answer
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B

Which one of the following statements is correct?

Correct Answer
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Which one of the following actions will decrease the operating cycle?

Correct Answer
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Which of the following are sources of cash? I.decreasing accounts receivable II.increasing inventory III.increasing accounts payable IV.increasing common stock

Correct Answer
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C

Correct Answer
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Which one of the following statements concerning a firm's sources and uses of cash is correct given the following account values?

Correct Answer
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Which one of the following is most indicative of a flexible short-term financial policy?

Correct Answer
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Correct Answer
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A committed line of credit:

Correct Answer
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The ____ facility is a major source of short-term finance for a corporation.It allows the company,without any previous notice,to put its bank account into ,up to an agreed limit.

Correct Answer
verified

Exam 16: Short-Term Financial Planning

The inventory period is equal to:

Correct AnswerverifiedShow Answer

Moore & Moore has just finished projecting its expected cash receipts and expenditures for next year.What is this projection called?

Correct AnswerverifiedShow Answer

The operating cycle is equal to which one of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will have? I.uncollectable accounts receivables II.work stoppages for lack of raw materials III.carrying costs IV.obsolete or out-of-date inventory

Correct AnswerverifiedShow Answer

Which one of the following statements related to a cash budget is correct?

Correct AnswerverifiedB

Which one of the following best describes a line of credit?

Correct AnswerverifiedShow Answer

Which one of the following commences on the day inventory is purchased and ends on the day the payment for that inventory is collected? Assume all sales and purchases are on credit.

Correct AnswerverifiedShow Answer

Which of the following are inversely related to increases in a firm's current assets? I.re-order costs II.shortage costs III.restocking costs IV.carrying costs

Correct AnswerverifiedShow Answer

Which one of the following is directly related to increases in a firm's current assets?

Correct AnswerverifiedShow Answer

The Windslow Co.has the following estimated sales: Sales Purchases are equal to 55 per cent of the following quarter's sales.What is the amount of anticipated purchases which will be made in the third quarter?

Correct AnswerverifiedB

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Which one of the following actions will decrease the operating cycle?

Correct AnswerverifiedShow Answer

Which of the following are sources of cash? I.decreasing accounts receivable II.increasing inventory III.increasing accounts payable IV.increasing common stock

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

Which one of the following statements concerning a firm's sources and uses of cash is correct given the following account values?

Correct AnswerverifiedShow Answer

Which one of the following is most indicative of a flexible short-term financial policy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A committed line of credit:

Correct AnswerverifiedShow Answer

The __________ facility is a major source of short-term finance for a corporation.It allows the company,without any previous notice,to put its bank account into ______,up to an agreed limit.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

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B

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C

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Correct Answer
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Correct Answer
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The ____ facility is a major source of short-term finance for a corporation.It allows the company,without any previous notice,to put its bank account into ,up to an agreed limit.

Correct Answer
verified