4. Which one of the following statements is correctconcerning the cash cycle?

A. The longer the cash cycle, the more likely a firm will needexternal financing.

B. Increasing the accounts payable period increases the cashcycle.

C. A positive cash cycle is preferable to a negative cashcycle.

D. The cash cycle can exceed the operating cycle if the payablesperiod is equal to zero.

E. Offering early payment discounts to customers will tend toincrease the cash cycle

5. You are the CFO of a business-seasonal firmspecializing in products related to water sports. The firmpurchases inventory one month before it is sold and pays for itsall purchases 60 days after the invoice date. Sales are alwayshighest during the months of July and August. You are in theprocess of preparing the cash disbursements section of yourcompany’s cash budget. Which one of the following statements issupported by this information?

A. Inventory purchases will be highest during the months of Julyand August.

B. Inventory purchases will be highest during the months of Mayand June.

C. Payments to suppliers will be highest during the months ofJune and July.

D. Payments to suppliers will be highest during the months ofJuly and August.

E. Payments to suppliers will be highest during the months ofAugust and September.

6. Media Modeling Insights (MMI) has $250,000 inaccounts receivable. To finance a major purchase, the companyassigns these receivables to Citibank. Which one of the followingstatements correctly describes this transaction?

A. MMI will immediately receive $250,000 and will have nofurther obligation related to these receivables.

B. MMI will receive some amount of cash immediately whilemaintaining full responsibility for any uncollectedreceivables.

C. Citibank accepts full responsibility for the collection ofthe accounts receivables and, in exchange, immediately pays MMI adiscounted value for its receivables.

D. Citibank accepts full responsibility for collecting theaccounts receivables and pays MMI a discounted price for theaccounts collected after the normal collection period haselapsed.

E. MMI receives the full amount of its receivables uponassignment but must reimburse Citibank for any uncollectedaccount.