1. Marie Company ships products throughout the country. The company has determined that by establishing local collection centers around the country, it can speed up the collection of payments by two and one-half days. Furthermore, the cash management department of their bank has indicated that they can defer the companys payments on its accounts by two days without affecting suppliers. The bank has a remote disbursement center in Florida. If the company has $5 million per day in collections and $3 million per day in disbursements, how many dollars will the cash management system free up?

2. Hurdle Company expects sales next year to be $700,000 if the economy is strong, $600,000 if the economy is steady, and $500,000 if the economy is weak. The company believes there is a 20% probability the economy will be strong, a 50% probability of a steady economy, and a 30% probability of a weak economy. What is the expected level of sales for next year?

3. Thompson Wood Products has credit sales of $3,102,500 and accounts receivable of $425,000. Compute the value of the average collection period.

4. Nowlin Pipe & Steel has projected sales of 72,000 pipes this year, an ordering cost of $6 per order, and carrying costs of $2.40 per pipe. What is the economic ordering quantity?

5. Harvard Co. has annual credit sales of $2,007,500 and an average collection period of 35 days in 2015. Assume a 365-day year. What is the companys average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period.

6. Howe Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of $4 per order, and carrying costs of $1.008 per unit. How many orders will be placed during the year?

7. The term structure of interest rates A. is an indication of investors' expectations about inflation and future interest rates. B. will be downward sloping if short-term interest rates are higher than long-term rates. C. will be upward sloping under normal conditions. D. all of these.

8. An inverted yield curve would suggest that A. interest rates are expected to rise. B. interest rates are expected to fall. C. inflation is expected to rise in the future. D. long-term rates are being pushed up by federal reserve policy.

9. Genetech has $4,000,000 in assets, have decided to finance 30% with long-term financing (9% rate) and 70% with short-term financing (7%) rate. What will be their annual interest costs? A. $78,000 B. $126,000 C. $440,000

10. Masters Machine Tool expects total sales of $60,000. The price per unit is $10. The firm estimates an ordering cost of $25 per order, with an inventory cost of $0.70 per unit. What is the optimum order size?

11. If a company can implement cash management systems and save 3 days by reducing remittance time and 1 day by increasing disbursement time based on $2,000,000 in average daily remittances and $2,500,000 in average daily disbursements and their return on freed up funds is 10%, what is the max they should spend on the system? A. $2,000,000 B. $650,000 C. $850,000 D. $1,000,000

12. All of the following are examples of carrying costs except: A. interest expense B. warehouse space C. shipping costs D. insurance premiums

13. Monarck King Size Beds, Inc., is evaluating a new promotional campaign that could increase sales. Possible outcomes and probabilities of the outcomes are shown below. Compute the expected value.

Possible Outcomes	Additional Sales in Units	Probabilities
Ineffective campaign..................	20	.20
Normal response........................	30	.50
Extremely effective.....................	70	.30

14. When actual sales are greater than forecasted sales A. inventory will decline. B. production schedules might have to be revised upward. C. accounts receivable will rise.

15. ABC Co. has an average collection period of 60 days. Total credit sales for the year were $2,400,000.What is the balance in accounts receivable at year-end?