Question 1

Generally speaking,which of the following situations will occur if a seasonal company adopts a compromise financial policy?
I.periods where short-term financing is required
II less long-term debt than if the firm followed a restrictive financial policy
III.periods of excess funds which can be invested in short-term marketable securities
IV.lower investment in fixed assets than if the firm adopted a flexible financial policy

Accepted Answer

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

Question 2

Joseph Schmidt and Co.has the following estimated sales.  Purchases are equal to 64 percent of the following quarter's sales.What is the cash outlay for accounts payable for quarter 3 if the firm has a 30-day accounts payable period? Assume each month has 30 days.

Accepted Answer

A)  $9,938
B)  $10,539
C)  $3,488
D)  $6,977
E)  $7,503F) A) and B)
G) B) and E)

Question 3

Which one of the following statements is true,all else constant?

Accepted Answer

A)  A decrease in the accounts receivable turnover rate decreases the cash cycle.
B)  Paying a supplier within the discount period, rather than waiting until the end of the normal credit period, will decrease the cash cycle.
C)  The cash cycle can never be negative.
D)  An increase in the inventory turnover rate will decrease the cash cycle.
E)  The payables period must be shorter than the receivables period.F) A) and B)
G) A) and E) D

Question 4

Green Earth's monthly purchases are equal to 70 percent of the following month's sales.The accounts payable period for purchases is 30 days.All other expenses are paid when incurred.Assume each month has 30 days and August sales are $18,500.The company has compiled the following information.  What is the projected amount of disbursements for the month of July?

Accepted Answer

A)  $13,910
B)  $14,550
C)  $16,100
D)  $16,430
E)  $16,760F) B) and C)
G) B) and E)

Question 5

Michael Jackson,Inc.currently has an operating cycle of 154 days and a cash cycle of 38 days.The firm is implementing some changes that will reduce the inventory period by 16 days and decrease the receivables period by 4 days on average.The accounts payable period will be decreased by 4 days.How many days will be in the new cash cycle once all of these changes become effective?

Accepted Answer

A)  15 days
B)  16 days
C)  22 days
D)  55 days
E)  61 daysF) All of the above
G) A) and E)

Question 6

Which one of the following statements related to the inventory period is correct?

Accepted Answer

A)  The inventory period increases as the inventory turnover rate increases.
B)  The length of the inventory period depends on the length of the cash cycle.
C)  The inventory period is the average number of days a firm holds inventory on its shelves.
D)  The inventory period is equal to the operating cycle minus the accounts payable period.
E)  The inventory period has no effect on the cash cycle.F) A) and E)
G) C) and D)

Question 7

Which one of the following characteristics applies to commercial paper?

Accepted Answer

A)  Maturities of 270 days or more
B)  Offerings registered with the SEC
C)  Interest rates higher than comparable bank loans
D)  Issued directly by large-sized firms
E)  Issued primarily by low-rated firmsF) None of the above
G) A) and D)

Question 8

Alderson Metals is compiling a cash balance projection by quarter for next year.Which one of the following adjustments to this projection will decrease the cumulative surplus?

Accepted Answer

A)  Reducing payroll costs from its current projection amount
B)  Decreasing the accounts receivable period by changing the firm's credit policy effective the first of next year
C)  Receiving more favorable credit terms from the firm's suppliers
D)  Increasing the dividend per share on the firm's outstanding common stock
E)  Refinancing the firm's long-term debt at a lower interest rateF) A) and B)
G) A) and E) D

Question 9

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

Accepted Answer

A)  Increasing inventory
B)  Paying suppliers faster
C)  Buying more inventory with cash rather than with credit
D)  Granting customers more time to pay for their credit purchases
E)  Lessening the production time needed to manufacture a good for saleF) A) and C)
G) B) and D)

Question 10

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)  Inventory period
B)  Accounts receivable period
C)  Accounts payable period
D)  Operating cycle
E)  Cash cycleF) A) and C)
G) B) and E)

Question 11

Pannick Motors has projected the following sales for the coming year.  Sales in the year following this one are projected to be 12 percent greater in each quarter.Assume the company places orders during each quarter equal to 45 percent of projected sales for the next quarter.How much will the firm pay its suppliers in quarter 3 if the firm has a 60-day payables period?

Accepted Answer

A)  $408
B)  $427
C)  $463
D)  $489
E)  $511F) B) and C)
G) All of the above

Question 12

The Monster Truck operates several specialty vehicles that provide hot food and beverages for firms that have workers employed in outlying regions.The company has annual sales of $350,500.Cost of goods sold average 48 percent of sales and the profit margin is 5.2 percent.The average accounts receivable balance is $44,700.On average,how long does it take The Hot Truck to collect payment for its services?

Accepted Answer

A)  7.84 days
B)  24.17 days
C)  46.55 days
D)  48.33 days
E)  51.90 daysF) D) and E)
G) B) and E)

Question 13

Which one of the following firms is most apt to have the shortest inventory period?

Accepted Answer

A)  General merchandise retail store
B)  Hardware store
C)  Furniture store
D)  Locomotive manufacturer
E)  DelicatessenF) D) and E)
G) None of the above

Question 14

Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Accepted Answer

A)  Inventory period remains constant
B)  Cash cycle increases
C)  Inventory turnover rate increases
D)  Accounts receivable turnover rate increases
E)  Cash cycle remains constantF) C) and E)
G) B) and D)

Question 15

Which of the following are inversely related to increases in a firm's current assets?
I.Reorder costs
II.Shortage costs
III.Restocking costs
IV.Carrying costs

Accepted Answer

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

Question 16

Which one of the following activities is a source of cash?

Accepted Answer

A)  Decreasing long-term debt
B)  Increasing inventory
C)  Repurchasing shares of stock
D)  Increasing fixed assets
E)  Decreasing accounts receivableF) A) and B)
G) A) and C)

Question 17

Harry Joiner,Inc.currently has an inventory turnover of 15.7,a payables turnover of 9.6,and a receivables turnover of 8.1.How many days are in the cash cycle?

Accepted Answer

A)  30.29 days
B)  32.70 days
C)  56.51 days
D)  84.39 days
E)  104.72 daysF) A) and B)
G) C) and E)

Question 18

The Cookie Shops' purchases are equal to 70 percent of the following month's sales.The accounts payable period for purchases is 30 days while all other expenditures are paid in the month they are incurred.Assume each month has 30 days.The company has compiled the following information.  What is the total amount of the firm's disbursements for the month of May?

Accepted Answer

A)  $5,990
B)  $6,170
C)  $6,410
D)  $6,571
E)  $6,880F) A) and C)
G) A) and B)

Question 19

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

Accepted Answer

A)  Operating projection
B)  Receivables schedule
C)  Balance sheet
D)  Cash budget
E)  Compromise policyF) A) and B)
G) B) and D)

Question 20

Westover Products has the following estimated monthly sales.  The accounts receivable period is 45 days.What is the amount of the collections in May? Assume each month has 30 days.

Accepted Answer

A)  $13,800
B)  $11,700
C)  $8,350
D)  $9,050
E)  $9,500F) A) and B)
G) A) and E)

Exam 16: Short-Term Financial Planning

Correct Answer
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C

Joseph Schmidt and Co.has the following estimated sales. Purchases are equal to 64 percent of the following quarter's sales.What is the cash outlay for accounts payable for quarter 3 if the firm has a 30-day accounts payable period? Assume each month has 30 days.

Correct Answer
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Which one of the following statements is true,all else constant?

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D

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Which one of the following statements related to the inventory period is correct?

Correct Answer
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Which one of the following characteristics applies to commercial paper?

Correct Answer
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Alderson Metals is compiling a cash balance projection by quarter for next year.Which one of the following adjustments to this projection will decrease the cumulative surplus?

Correct Answer
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D

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

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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.

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Which one of the following firms is most apt to have the shortest inventory period?

Correct Answer
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Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Correct Answer
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Which of the following are inversely related to increases in a firm's current assets? I.Reorder costs II.Shortage costs III.Restocking costs IV.Carrying costs

Correct Answer
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Which one of the following activities is a source of cash?

Correct Answer
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Harry Joiner,Inc.currently has an inventory turnover of 15.7,a payables turnover of 9.6,and a receivables turnover of 8.1.How many days are in the cash cycle?

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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Westover Products has the following estimated monthly sales. The accounts receivable period is 45 days.What is the amount of the collections in May? Assume each month has 30 days.

Correct Answer
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Exam 16: Short-Term Financial Planning

Correct AnswerverifiedC

Joseph Schmidt and Co.has the following estimated sales. Purchases are equal to 64 percent of the following quarter's sales.What is the cash outlay for accounts payable for quarter 3 if the firm has a 30-day accounts payable period? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

Which one of the following statements is true,all else constant?

Correct AnswerverifiedD

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements related to the inventory period is correct?

Correct AnswerverifiedShow Answer

Which one of the following characteristics applies to commercial paper?

Correct AnswerverifiedShow Answer

Alderson Metals is compiling a cash balance projection by quarter for next year.Which one of the following adjustments to this projection will decrease the cumulative surplus?

Correct AnswerverifiedD

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

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following firms is most apt to have the shortest inventory period?

Correct AnswerverifiedShow Answer

Which one of the following can occur if the operating cycle decreases while both the accounts receivable and the accounts payable periods remain constant?

Correct AnswerverifiedShow Answer

Which of the following are inversely related to increases in a firm's current assets? I.Reorder costs II.Shortage costs III.Restocking costs IV.Carrying costs

Correct AnswerverifiedShow Answer

Which one of the following activities is a source of cash?

Correct AnswerverifiedShow Answer

Harry Joiner,Inc.currently has an inventory turnover of 15.7,a payables turnover of 9.6,and a receivables turnover of 8.1.How many days are in the cash cycle?

Correct AnswerverifiedShow Answer

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

Westover Products has the following estimated monthly sales. The accounts receivable period is 45 days.What is the amount of the collections in May? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

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C

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D

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D

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