Question
1. A firm purchased goods with a purchase price of $1,000 and the following credit terms: a credit period of 30 days; 1% discount if
1. A firm purchased goods with a purchase price of $1,000 and the following credit terms: a credit period of 30 days; 1% discount if paid within 10 days. The firm paid for these goods on the 5th day after the date of sale. The firm must pay ________ for the goods.
A $990
B $900
C $1,000
D $1,100
2. Which of the following major variables should be considered when evaluating proposed changes in credit standards?
A level of inventories
B accounts payable
C level of liquid assets
D bad debt expenses
3. Taizhou Products uses 800 units of a product per year on a continuous basis. The product has carrying costs of $50 per unit per year and order costs of $300 per order. It takes 30 days to receive a shipment after an order is placed and the firm requires a safety stock of 5 days usage in inventory. The economic order quantity (EOQ) will be:
A 98 units
B 96 units
C 69 units
D 68 units
4. A firm purchased raw materials on account and paid for them after 30 days. The raw materials were used in manufacturing a finished goods sold on account 100 days after the raw materials were purchased. The customer paid for the finished good 60 days later. The firm's cash conversion cycle is ________ days.
A 10
B 70
C 130
D 190
5. Collateral is one of the five Cs of credit. What is meant by collateral?
A the customers record of meeting past obligations.
B the customers ability to pay the given credit, as judged in terms of financial statement analysis.
C the customers debt relative to equity
D the amount of assets the customer has available for use in securing credit.
6. The conversion of current assets ________.
A from inventory to receivables to cash provides the cash used to pay current liabilities
B from inventory to receivables to marketable securities provides the cash used to buy plant and equipment
C from cash to receivables to inventory provides the cash used to pay non-current liabilities
D from cash to receivables to inventory provides the cash used to repurchase stock
7. In general, the more net working capital a firm has, ________.
A the greater its risk
B the lower its risk
C the less likely it is that creditors will lend to the firm
D the lower its level of long-term funds
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