11. Which of the following would be considered a variable cost?

A. The cost of property & casualty insurance.

B. Salary paid to the chief financial officer.

C. Rent on the production and office facilities.

D. Wages paid to customer service representatives.

12. Claras Costumes is a retailer of costumes, primarily purchased for Halloween. Which of the following characteristics would most likely be present in Claras financial statements?

A. Inventory will increase immediately following the seasonal peak.

B. The need for credit will be lowest during the high point in the operating cycle.

C. Receivables will increase after the increase in inventories.

D. Fixed asset spending will be highest at the seasonal peak.

13. During a recent meeting with Your Banks loan committee, you were asked to determine why Clear Lights, a manufacturer of lights used in office buildings, requested financing. It was stated that the company had positive cash after debt amortization. What then would be the cause of the financing request?

A. Operating expenses

B. Dividend payments

C. Interest expense

D. Capital expenditures

14. In which company lifecycle stage is a company most likely to invest in equipment that adds efficiency?

A. Introductory

B. Growth

C. Mature

D. Declining

15. If a company has negative net cash income, which of the following observations is true?

A. The company did not generate enough cash flow from sales to cover cash production costs.

B. The company did not generate enough net cash after operations to cover interest and dividends.

C. The company did not generate enough cash after operations to pay its taxes.

D. The company did not generate enough cash profits to cover its cash operating expenses.

16. Six months ago a high fashion retailer opened an outlet store to sell out-of-season goods left over from its main location. A review of the retailers current year results compared to prior years is likely to show which of the following results?

A. Lower sales growth

B. Higher operating margin

C. A lower gross profit margin

D. Higher income tax rate

17. Which of the following events would create a cash inflow in a direct cash flow statement?

A. Sales growth with stable margins.

B. Longer customer payment terms.

C. Slower payment of trade creditors.

D. Pay off existing bank debt.

18. Gruper Home Appliances, Inc., a manufacturer of kitchen appliances, sells 70% of its goods to X-Mart, a large national retailer of consumer durables. Which of the following best describes the reason why Gruper has a low degree of bargaining power with X-Mart?

A. There are no substitutes for the product.

B. The suppliers have high variable costs.

C. Customers have brand loyalty.

D. Sales are concentrated with a large volume buyer.

19. The economy is entering the late contraction stage of the business cycle. Your Bank has four customers requesting an increase to their lines of credit. Assuming their overall creditworthiness is comparable, which of the following customers would exhibit the least risk to the Bank?

A. A wholesaler of floor coverings

B. An upscale childrens clothing boutique

C. A beer and soda distributor

D. A temporary staffing firm

20. Cheap Stuff, Ltd. is a distributor of goods to discount stores. The company has experienced 12% sales growth over the last three years. Despite continued economic declines projected, the company is forecasting continued sales growth of 10-15% each year over the next 3 years. Which of the following sources of financing would be most appropriate to support related increases in receivables and inventory?

A. Demand note

B. Seasonal line of credit

C. Bridge loan

D. Revolving line of credit