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