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41.              The operating cycle can be reduced by lengthening the

Question : 41.              The operating cycle can be reduced by lengthening the : 1527203

 

41.              The operating cycle can be reduced by lengthening the accounts payable period.

42.              The cash conversion cycle can be reduced by lengthening the accounts payable period.

43.              Both the operating cycle and the cash conversion cycle can be reduced by shortening the inventory period.

44.              A firm with an inventory period of 100 days and an accounts payable period of 50 days will have an operating cycle of 150 days.

45.              A firm with an inventory period of 100 days and an accounts receivable period of 50 days will have an operating cycle of 150 days.

46.              Speculative motives for holding cash include holding funds to meet unexpected demands.

47.              Transactions motives for holding cash include holding funds to meet unexpected demands.

48.              Precautionary motives for holding cash include holding funds to take advantage of unusual cash discounts for needed materials.

49.              The delivery or transmission float is the delay in transferring the means of payment from the payor (customer) to the payee (the provider of goods or services).

50.              The disbursement float is the delay in transferring the means of payment from the payor (customer) to the payee (the provider of goods or services).

1.              Which of the following would not normally be discussed when describing a firm’s operating cycle?

a.manufacturing process

b.selling effort

c.acquiring financing

d.collection period

2.                Which one of the following activities is not a major component of the operating cycle?

a.manufacturing process

b.selling effort

c.collection period

d.asset investment decisions

3.              The portion of current assets financed through long-term financing is referred to as the:

a.net working capital

b.current ratio

c.seasonal current assets

d.fixed assets

4.              Sources of short-term financing such as accounts payable, notes payable, and accruals should be used to finance:

a.all current assets

b.all fixed assets

c.a portion of the current assets needed to support nonseasonal sales levels plus all of the seasonal build-up in current assets

d.a portion of the fixed assets plus all of the seasonal build-up in current assets

5.              As sales increase over time, assets will increase at the same growth rate so long as the

a.asset turnover increases

b.asset turnover ratio remains constant

c.asset turnover ratio decreases

d.profit margin remains constant

6.              Which of the following cycles is not a component of the firm’s operating cycle?

a.inventory cycle

b.accounts receivable cycle

c.accounts payable cycle

d.fixed asset cycle

7.              A mercantile credit bureau serves primarily as a (n):

a.collection agency for delinquent accounts

b.common meeting place where credit managers may exchange information

c.organization through which accounts receivable may be sold to other businesses

d.central record-keeping organization for credit information on business firms

8.              One type of investment that would not be suitable for marketable securities would be:

a.bankers’ acceptances

b.short-term notes of U.S. government agencies

c.negotiable CD’s

d.mortgages

9.              Dun & Bradstreet serves as:

a.an agency for rating the bonds of businesses and governmental bodies

b.the principal rating agency for commercial paper

c.a research and advisory facility for stocks and bonds

d.a general credit reporting agency covering all fields of business activity

10.              Marketable securities are held primarily to meet:

a.transactions motives

b.precautionary motives

c.speculative motives

d.leverage motives

11.              The willingness of a credit applicant to pay her or his bills is measured by:

a.capacity

b.capital

c.conditions

d.character

e.collateral

12.              The principle of hedging calls for the matching of a firm’s average:

a.liquidity of its assets with its liabilities and equity

b.liquidity of its accounts receivable with its accounts payable

c.maturities of its assets with its liabilities and equity

d.maturities of its sales with its assets

13.              Working capital does not include:

a.cash

b.accounts receivable

c.marketable securities

d.property, plant, and equipment

14.              In cash budgeting, the ________ seasonal and uncertain a firm's cash flows, the ________ the number of budgeting intervals it should use

a.more; greater

b.more; fewer

c.less; greater

d.less; fewer

15.              Assume a firm’s production process requires an average of 80 days to go from raw materials to finished products and another 40 days before the finished goods are sold. If the accounts receivable cycle is 70 days and the accounts payable cycle is 80 days, what would the operating cycle be?

a.110 days

b.130 days

c.190 days

d.270 days

16.              If a firm has net sales of $400,000, annual cost of goods sold of $315,000, an inventory turnover of 4.5 times a year, and an accounts receivable turnover of five times a year, the combined investment in inventories and accounts receivable would be:

a.$64,500

b.$92,000

c.$122,500

d.$150,000

17.              Which of the following is not an advantage of short-term borrowing?

a.flexibility

b.establishing continuous relationships with a bank or financial institution

c.frequent renewals

d.lower cost

18.              Taking advantage of unusual cash discounts or price bargains is an example of the:

a.transactions motive

b.precautionary motive

c.speculative motive

d.leverage motive

19.              Reasons to invest in marketable securities would not include:

a.transactions motives

b.precautionary motives

c.speculative motives

d.all the above are reasons to invest in marketable securities

e.none of the above

20.              A firm’s cash receipts may include all of the following except

a.dividends received from other firms

b.collections of accounts receivable

c.cash sales

d.interest income

e.all of the above

21.              If a firm’s inventories on hand are $200,000 and its cost of goods sold is $600,000, what is the inventory turnover?

a.2.0 times

b.3.0 times

c.4.0 times

d.0.33 times

22.              Federal funds rates usually parallel the:

a.prime rate

b.U. S. Treasury bill rate

c.Dow Jones Industrial Average

d.none of the above

23.              When determining the operating cycle, which of the following components reduce the length of the cycle?

a.increases in the inventory period

b.increases in the accounts receivable period

c.increases in the accounts payable period

d.all of the above

24.              Calculation of a firm’s average collection period is the same as calculating the:

a.accounts receivable cycle

b.inventory cycle

c.accounts payable cycle

d.cash cycle

25.              Which of the following statements is most correct?

a.Eurodollars are deposits placed in foreign banks that remain denominated in U.S. dollars.

b.Treasury bills are actively traded in secondary money markets.

c.The most common trading unit for federal funds is $1 million.

d.All of the above statements are correct.

26.              Which of the following would not be a characteristic of commercial paper?

a.issued by well-known business firms

b.debt is secured

c.short-term debt

d.all are characteristics of commercial paper

27.              The time between ordering materials and collecting cash from receivables is known as the:

a.operating cycle

b.cash conversion cycle

c.accounts receivable period

d.none of the above

28.              The time between when the firm pays its suppliers and when it collects money from its customers is known as the:

a.operating cycle

b.cash conversion cycle

c.accounts receivable period

d.none of the above

29.              One item that does not affect the cash conversion cycle is:

a.inventory period

b.accounts receivable

c.accounts payable period

d.all the above affect the cash conversion cycle

30.              If a firm has an operating cycle of 120 days and an average payment period of 20 days, its cash conversion cycle would be:

a.100 days

b.140 days

c.18 days

d.cannot be determined from this information

31.              A firm with a operating cycle of 200 days and an cash conversion cycle of 120 days has an average payment period of:

a.320

b.80

c.3

d.cannot be determined from this information

32.              The size of the cash buffer depends upon:

a.the ability to easily acquire financing on short notice

b.the predictability of cash inflows

c.management preferences

d.all the above

33.              Examples of regular cash outflows would not include:

a.materials purchases

b.rent

c.utility bills

d.all the above are regular cash outflows

34.              A firm has a minimum desired cash balance of $10,000. Any cash shortfalls will be made up with short-term financing. The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

a.-$2,000

b.$10,000

c.$3,000

d.cannot determine from this information

35.              A firm has a minimum desired cash balance of $120,000. Any cash shortfalls will be made up with short-term financing. The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

a.-$120,000

b.$25,000

c.$215,000

d.cannot determine from this information

36.              The level of investment in accounts receivable depends on:

a.credit analysis

b.credit terms

c.collection efforts

d.all the above

e.none of the above

37.              Which of the following statements is false?

a.the cash conversion cycle is the time between when the firm pays its suppliers and when it collects money from its customers.

b.Because commercial paper rates are typically below the U.S. Treasury bill rates, commercial paper is a valuable short-term financing source for high quality business firms.

c.More efficient management of working capital assets will lessen the firm’s need to obtain financing.

d.All of the statements above are correct.

38.              The projections on a cash budget will reflect all of the following except:

a.the firm’s marketing effort.

b.the firm’s credit policies.

c.how the firm manages its receivables

d.All of the statements above are correct.

39.              The time between when a payee sends payment and the funds are credited to the payee’s bank account is called the:

a.collection float

b.disbursement float

c.total float

d.transmittal float

40.              Methods used to speed up collections include all of the following except:

a.a lockbox system

b.remote disbursement locations

c.pre-authorized checks

d.All of the statements above are correct.

41.              Which one of the following asset accounts is not a part of a firm’s working capital?

a.cash and marketable securities

b.accounts receivable

c.inventories

d.fixed assets

42.              A survey of financial managers found they spend nearly what percent of their time dealing with financial planning, budgeting, and working capital issues?

a.10 percent

b.30 percent

c.50 percent

d.70 percent

43.              The time it takes between when materials are ordered and cash is collected from receivables is referred to as the:

a.operating cycle

b.cash conversion cycle

c.assets turnover cycle

d.sales or revenues cycle

44.              If a firm purchases materials on credit and thus has accounts payable, its cash conversion cycle will be:

a.longer than its operating cycle

b.the same length as its operating cycle

c.shorter than its operating cycle

d.the same length as its sales turnover cycle

45.              Business firms hold cash and marketable securities for which of the following reasons or motives?

a.transactions, precautionary, and goodwill motives

b.precautionary, speculative, and goodwill motives

c.transactions, precautionary, and speculative motives

d.precautionary, goodwill, and transactions motives

46.              Which of the following marketable securities is sold at a discount throughout competitive bidding in a weekly auction?

a.U.S. Treasury bills

b.federal funds

c.commercial paper

d.negotiable certificates of deposit

47.              Deposits placed in foreign banks that remain denominated in U.S. dollars are called:

a.bankers’ acceptances

b.Eurodollars

c.federal funds

d.commercial paper

48.              Which of the following is not considered to be one of the five C’s of credit analysis?

a.character

b.capacity

c.capital

d.collateral

e.caution

49.              Which one of the following is a private firm that operates as a credit-reporting agency?

a.National Credit Interchange Bureau

b.Foreign Credit Interchange Bureau

c.Dun & Bradstreet

d.Merrill-Lynch

50.              A firm with an inventory period of 30 days, an accounts receivable period of 30 days, and an accounts payable period of 90 days has a cash conversion cycle of _____ days.

a.150

b.-60

c.30

d.-30

 

 

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