21. The company uses 150,000 gallons of alcohol per month. The cost of carrying the alcohol in inventory is P0.50 per gallon per year, and the cost of ordering is P150 per order. The firm uses the alcohol at a constant rate throughout the year. It takes 18 days to receive an order once it is placed. The reorder point is

a) 7,500 gallons.

b) 25,000 gallons.

c) 90,000 gallons.

d) 105,000 gallons.

22. Which of the following statements are correct in relation to the term float?

a) Processing float is the delay between the receipt of a check by the payee and its deposit in the firm's account.

b) Mail float is the delay between the deposit of a check by a payee and the actual availability of the funds.

c) Assuming that the firm has done all it can to stimulate customers to pay promptly and to select vendors offering the most attractive and flexible credit terms, it can further speed collections and slow disbursements by taking advantage of the "float" existing in the collection and payment systems.

d) Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer.

23. The company's budgeted sales for the coming year are P30,000,000 of which 70% are expected to be credit sales at terms of n/30. Itestimates that a proposed relaxation of credit standards will increase credit sales by 30% and increase the average collection period from 20 days to 30 days. Based on a 360-day year, the proposed relaxation of credit to standards will result in an expected increase in the average accounts receivable balance of

a) P 933,340

b) P 1,050,000

c) P2,275,000

d) P1,108,333.33

24. Which of the following statements are correct in relation to working capital management?

a) A firm that is unable to pay its bills as they come due is technically insolvent.

b) The shortterm financial management is concerned with management of the firm's current assets and current liabilities.

c) In the shortterm financial management, the goal is to manage each of the firm's current assets and current liabilities in order to achieve a balance between profitability and risk that contributes to the firm's value.

d) Working capital represents the portion of the firm's investment that circulate from one form to another in the longterm conduct of business

25. The basic strategies for determining the appropriate financing mix are

a) seasonal and permanent.

b) short term and long term.

c) aggressive and conservative.

d) current and fixed.

26. Which of the following statements are correct in relation to credit terms?

a) If the firm's credit period in decreased, the sales volume can be expected to increase, the investment in accounts receivable can be expected to increase, and the bad debt expenses can be expected to increase.

b) 2/15 net 45 translates as 2 percent of the balance is due in 15 days; the remaining balance is due in 45 days.

c) If the cash discount period is increased, the firm's investment in accounts receivable due to non-discount takers now paying earlier is expected to decrease.

d) If the cash discount period is increased, the firm's investment in accounts receivable due to discount takers still getting cash discounts but paying later is expected to increase.