Question 1

StarrKnight Corporation's accounts payable deferred period for 2008 is (use average payables) :

Accepted Answer

A)  7.75
B)  7.96
C)  8.94
D)  9.02
E)  10.39F) D) and E)
G) B) and D)

Question 2

The average inventory for the StarrKnight Corporation in 2008 is:

Accepted Answer

A)  $12,567.50
B)  $12,883.50
C)  $23,837.50
D)  $24,702.50
E)  $25,567.50F) C) and D)
G) A) and B)

Question 3

Your bank offers you a $50,000 line of credit with an interest rate of 2.25% per quarter.What is your effective annual interest rate if you borrow the whole $50,000 for the entire year? Assume that both the funds you borrow and the funds you invest use compound interest.

Accepted Answer

A)  9.00%
B)  9.31%
C)  9.68%
D)  9.78%
E)  9.97%F) B) and E)
G) B) and D)

Question 4

It has been argued that if one could perfectly synchronize a firm's cash inflows and outflows,short-term financial planning would be unnecessary.Do you agree?
 What actions can the firm's financial decision-makers take to reduce the degree of asynchronization?
 Why should this be a concern?

Accepted Answer

This question asks the student to note t...

Question 5

The length of time between the acquisition of inventory by a firm and the payment by the firm for that inventory is called the:

Accepted Answer

A)  operating cycle.
B)  inventory period.
C)  accounts payable period.
D)  accounts receivable period.
E)  cash cycle.F) All of the above
G) C) and D)

Question 6

Your firm has a net cash inflow for the quarter of $75.The beginning cash balance is $35.Company policy is to maintain a minimum cash balance of $15 and borrow only the amount that is necessary to maintain that balance.How much does your firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus?

Accepted Answer

A)  Borrow $40
B)  Borrow $10
C)  Repay $10
D)  Repay $95
E)  Repay $125F) B) and E)
G) B) and D)

Question 7

Which one of the following will decrease the operating cycle?

Accepted Answer

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 days in accounts payable
E)  Decreasing the days sales in inventoryF) B) and D)
G) B) and E)

Question 8

A type of short-term loan where the borrower sells its receivables to the lender up-front,but at a discount to face value,is called:

Accepted Answer

A)  a compensating balance.
B)  assigned receivables financing.
C)  a letter of credit.
D)  factored receivables financing.
E)  a bond.F) C) and D)
G) B) and D)

Question 9

A short-term loan where the lender holds the borrower's receivables as security is called:

Accepted Answer

A)  a compensating balance.
B)  a letter of credit.
C)  assigned receivables financing.
D)  factored receivables financing.
E)  a bond.F) B) and E)
G) B) and D)

Question 10

As the CFO of Billybob's Auto Recycling,you plan to implement a system whereby customers who pay their bills on time will receive a 10% rebate on their purchases.Those who pay earlier than required will receive a 15% rebate.Explain the impact of this proposal on the firm.

Accepted Answer

The obvious results of this policy chang...

Question 11

Which of the following are uses of cash?
I.marketable securities are sold
II.the amount of inventory on hand is increased
III.the firm takes out a long-term bank loan
IV.payments are paid on accounts payable

Accepted Answer

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

Question 12

Which of the following is not included in current assets?

Accepted Answer

A)  Cash
B)  Inventories
C)  Accounts receivable
D)  Accrued wages
E)  All of the above are included in current assets.F) B) and C)
G) B) and E)

Question 13

Which one of the following will increase the cash cycle?

Accepted Answer

A)  Improving the cash discounts given to customers who pay their account early
B)  Having a larger percentage of customers paying with cash instead of credit
C)  Buying less raw materials to have on hand
D)  Paying your suppliers earlier to receive the discount they offer
E)  Ordering raw materials inventory only when you need itF) C) and D)
G) A) and C)

Question 14

A firm currently has a 35 day cash cycle.Assume that the firm changes its operations such that it decreases its receivables period by 4 days,increases its inventory period by 2 day and decreases its payables period by 3 days.What will the length of the cash cycle be after these changes?

Accepted Answer

A)  31 days
B)  33 days
C)  35 days
D)  36 days
E)  37 daysF) D) and E)
G) C) and D)

Question 15

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

Accepted Answer

A)  The cash cycle is equal to the operating cycle minus the inventory period.
B)  A negative cash cycle is actually preferable to a positive cash cycle.
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)  The most desirable cash cycle is the one that equals zero days.F) B) and D)
G) A) and E)

Question 16

Wilson,Inc.has an inventory turnover rate of 14,an accounts payable period of 54 days and an accounts receivable period of 37 days.What is the length of the cash cycle?

Accepted Answer

A)  -7.33 days
B)  -2.00 days
C)  2.00 days
D)  7.33 days
E)  9.07 daysF) B) and D)
G) All of the above

Question 17

The appropriate amount of short-term borrowing is determined by:

Accepted Answer

A)  maturity hedging.
B)  cash reserves.
C)  relative interest rates.
D)  All of the above.
E)  None of the above.F) All of the above
G) B) and E)

Question 18

Your firm has a net cash inflow for the quarter of $80.The beginning cash balance is $40.Company policy is to maintain a minimum cash balance of $22 and borrow only the amount that is necessary to maintain that balance.How much does your firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus?

Accepted Answer

A)  Borrow $70
B)  Borrow $40
C)  Repay $22
D)  Repay $98
E)  Repay $108F) A) and D)
G) None of the above

Question 19

Which one of the following statements is correct?

Accepted Answer

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.F) B) and C)
G) A) and E)

Question 20

Cash cycle equals:

Accepted Answer

A)  inventory period plus accounts receivable period.
B)  change in net working capital period.
C)  operating cycle plus accounts payable period.
D)  operating cycle plus inventory period.
E)  None of the above.F) A) and B)
G) A) and E)

Exam 18: Short-Term Finance and Planning

The appropriate amount of short-term borrowing is determined by:

Correct Answer
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Correct Answer
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It has been argued that if one could perfectly synchronize a firm's cash inflows and outflows,short-term financial planning would be unnecessary.Do you agree? What actions can the firm's financial decision-makers take to reduce the degree of asynchronization? Why should this be a concern?

Correct Answer
verified
This question asks the student to note t...
View Answer

Which one of the following will increase the cash cycle?

Correct Answer
verified

Which of the following is not included in current assets?

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

Correct Answer
verified

Correct Answer
verified

Wilson,Inc.has an inventory turnover rate of 14,an accounts payable period of 54 days and an accounts receivable period of 37 days.What is the length of the cash cycle?

Correct Answer
verified

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

Correct Answer
verified

A firm currently has a 35 day cash cycle.Assume that the firm changes its operations such that it decreases its receivables period by 4 days,increases its inventory period by 2 day and decreases its payables period by 3 days.What will the length of the cash cycle be after these changes?

Correct Answer
verified

As the CFO of Billybob's Auto Recycling,you plan to implement a system whereby customers who pay their bills on time will receive a 10% rebate on their purchases.Those who pay earlier than required will receive a 15% rebate.Explain the impact of this proposal on the firm.

Correct Answer
verified
The obvious results of this policy chang...
View Answer

The length of time between the acquisition of inventory by a firm and the payment by the firm for that inventory is called the:

Correct Answer
verified

Which of the following are uses of cash? I.marketable securities are sold II.the amount of inventory on hand is increased III.the firm takes out a long-term bank loan IV.payments are paid on accounts payable

Correct Answer
verified

StarrKnight Corporation's accounts payable deferred period for 2008 is (use average payables) :

Correct Answer
verified

Cash cycle equals:

Correct Answer
verified

Your bank offers you a $50,000 line of credit with an interest rate of 2.25% per quarter.What is your effective annual interest rate if you borrow the whole $50,000 for the entire year? Assume that both the funds you borrow and the funds you invest use compound interest.

Correct Answer
verified

Which one of the following statements is correct?

Correct Answer
verified

A short-term loan where the lender holds the borrower's receivables as security is called:

Correct Answer
verified

The average inventory for the StarrKnight Corporation in 2008 is:

Correct Answer
verified

A type of short-term loan where the borrower sells its receivables to the lender up-front,but at a discount to face value,is called:

Correct Answer
verified

Exam 18: Short-Term Finance and Planning

The appropriate amount of short-term borrowing is determined by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

It has been argued that if one could perfectly synchronize a firm's cash inflows and outflows,short-term financial planning would be unnecessary.Do you agree? What actions can the firm's financial decision-makers take to reduce the degree of asynchronization? Why should this be a concern?

Correct AnswerverifiedThis question asks the student to note t...View AnswerShow Answer

Which one of the following will increase the cash cycle?

Correct AnswerverifiedShow Answer

Which of the following is not included in current assets?

Correct AnswerverifiedShow Answer

Which one of the following will decrease the operating cycle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Wilson,Inc.has an inventory turnover rate of 14,an accounts payable period of 54 days and an accounts receivable period of 37 days.What is the length of the cash cycle?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm currently has a 35 day cash cycle.Assume that the firm changes its operations such that it decreases its receivables period by 4 days,increases its inventory period by 2 day and decreases its payables period by 3 days.What will the length of the cash cycle be after these changes?

Correct AnswerverifiedShow Answer

As the CFO of Billybob's Auto Recycling,you plan to implement a system whereby customers who pay their bills on time will receive a 10% rebate on their purchases.Those who pay earlier than required will receive a 15% rebate.Explain the impact of this proposal on the firm.

Correct AnswerverifiedThe obvious results of this policy chang...View AnswerShow Answer

The length of time between the acquisition of inventory by a firm and the payment by the firm for that inventory is called the:

Correct AnswerverifiedShow Answer

Which of the following are uses of cash? I.marketable securities are sold II.the amount of inventory on hand is increased III.the firm takes out a long-term bank loan IV.payments are paid on accounts payable

Correct AnswerverifiedShow Answer

StarrKnight Corporation's accounts payable deferred period for 2008 is (use average payables) :

Correct AnswerverifiedShow Answer

Cash cycle equals:

Correct AnswerverifiedShow Answer

Your bank offers you a $50,000 line of credit with an interest rate of 2.25% per quarter.What is your effective annual interest rate if you borrow the whole $50,000 for the entire year? Assume that both the funds you borrow and the funds you invest use compound interest.

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

A short-term loan where the lender holds the borrower's receivables as security is called:

Correct AnswerverifiedShow Answer

The average inventory for the StarrKnight Corporation in 2008 is:

Correct AnswerverifiedShow Answer

A type of short-term loan where the borrower sells its receivables to the lender up-front,but at a discount to face value,is called:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
This question asks the student to note t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The obvious results of this policy chang...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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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