________ 1. Which one of the following activities will increase cash?

a. increasing inventory

b. repurchasing shares of stock

c. increasing accounts payable

d. buying new equipment

________ 2. Which one of the following will decrease the cash cycle?

a. increasing the inventory period

b. decreasing the accounts receivable turnover rate

c. increasing the accounts receivable period

d. decreasing the accounts payable turnover rate

________ 3. The Gift Mart has sales of $832,000 and cost of goods sold of $591,000. What is the accounts receivable period if the average receivables balance is $63,400?

a. 27.81 days b. 29.64 days c. 37.08 days d. 39.16 days

________ 4. Which of the following are associated with a restrictive short-term financial policy?

I. low cash balance

II. minimal investment in marketable securities

III. high level of accounts receivable

IV. high number of inventory stock-outs

a. II and IV only b. I, II, and IV only c. I, III, and IV only d. I, II, III, and IV

________ 5. West Coast Ventures has annual sales of $942,000. Cost of goods sold equal 69 percent of sales. The average accounts receivable balance is $83,600 and the average accounts payable balance is $142,700. How long on average does it take this firm to pay its creditors?

a. 55.29 days b. 46.95 days c. 80.13 days d. 116.13 days

________ 6. A firm has projected monthly sales of $16,400, $17,300, and $18,500 for the months of January, February, and March, respectively. December sales were $21,700. The firm collects 35 percent of its sales in the month of sale, 62 percent in the month following the month of sale, and 3 percent in the second month following the month of sale. What is the amount of the February collections?

a. $16,454 b. $16,874 c. $17,108 d. $17,693

________ 7. Alfa Industries has a line of credit with their local bank. The loan terms require the loan be paid in full for at least one 60-day period per year. What is this 60-day period called?

a. grace period b. factor period c. revolver period d. cleanup period

________ 8. Global Exporters has an arrangement with its bank to factor its receivables on an ongoing basis. Which one of the following statements is most likely correct given this arrangement?

a. Global Exporters will sell its receivables for full value.

b. The bank is responsible for collecting the accounts receivable.

c. Global Exporters will have to repay the bank for any uncollected receivable.

d. The receivables are assigned as collateral but remain an asset of Global Exporters.

________ 9. A firm has an ending cash balance of $1,700 and a cumulative surplus of $1,300. What is the minimum cash balance?

a. $0 b. $400 c. $1,500 d. $3,000

________ 10. Which one of the following financial policies is most apt to increase the short-term borrowing needs of a firm?

a. flexible b. restrictive c. compromise d. cannot be determined

________ 1. Your book balance for cash is $811. You have an outstanding deposit of $210 and three outstanding checks totaling $316. What is your available cash balance?

a. $495 b. $705 c. $917 d. $1,021

________ 2. Which one of the following types of delay refers to the time it takes a firm to sort the mail, prepare the checks received for deposit, and deliver the deposit to the bank?

a. availability b. mailing c. processing d. disbursement

________ 3. Which one of the following statements concerning lockboxes is correct?

a. Lockboxes offer no benefit since the Check Clearing Act for the 21st Century became law.

b. Lockbox payments are generally deposited into a firms bank account prior to the firm recording that

payment on the customers account.

c. Lockboxes are generally used in place of a cash concentration account.

d. The check payee picks up and processes checks from its lockboxes multiple times during the day.

________ 4. Which one of the following motives is used to refer to the holding of cash so a firm can benefit from an unforeseen investment opportunity?

a. precautionary b. speculative c. transaction

________ 5. Generally speaking, when is money deposited into a controlled disbursement account?

a. never

b. on a monthly basis only

c. whenever excess funds are available in the master account

d. as needed to cover checks presented for payment

________ 6. Which one of the following characteristics generally applies to commercial paper?

a. maturities of 90 days or less

b. high level of liquidity

c. active secondary market

d. unsecured

________ 7. A firm has credit terms of 1/7, net 25. What is the net credit period?

a. 1 b. 7 c. 18 d. 25

________ 8. A firm offers credit terms of 1/5, net 20. What is the effective annual rate if a customer foregoes the discount on a $3,000 purchase?

a. 22.50 percent b. 23.33 percent c. 24.36 percent d. 27.71 percent

________ 9. Which of the following affect the credit period?

I. account size

II. product cost

III. competition

IV. perishability

a. I and II only b. I and III only c. II, III, and IV only d. I, II, III, and IV

________ 10. A firm has annual sales of 21,000 units at an average selling price of $54 a unit. The carrying cost per unit is $2.70. The fixed cost per order is $51. The inventory is allowed to fall to zero before it is restocked. What is the EOQ?

a. 834 units b. 891 units c. 906 units d. 923 units