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If the cash discount period is increased, a firm's investment in accounts receivable is expected to ________.

Question 11 options:

	decrease because of nondiscount takers paying earlier to avail the cash discount
	decrease because discount takers will pay more in order to get more discount
	decrease because new customers will doubt the quality of product due to increase in discount
	increase because existing customers attracted by the new policy will buy more products

Question 12 (1 point)

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A firm has an average age of inventory of 101 days, an average collection period of 49 days, and an average payment period of 60 days. The firm's cash conversion cycle is ________ days.

Question 12 options:

	150
	109
	90
	11

Question 13 (1 point)

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Table 15.2

The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent. If the firm was to shift $3,000 of current assets to fixed assets, the firm's net working capital would ________, and the risk of insolvency would ________, respectively. (See Table 15.2)

Question 13 options:

	decrease; decrease
	increase; increase
	increase; decrease
	decrease; increase

Question 14 (1 point)

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Table 15.1 Irish Air Services has determined several factors relative to its asset and financing mix.

(a)	The firm earns 10 percent annually on its current assets.

(b)	The firm earns 20 percent annually on its fixed assets.

(c)	The firm pays 13 percent annually on current liabilities.

(d)	The firm pays 17 percent annually on long-term funds.

(e)	The firm's monthly current, fixed, and total asset requirements for the previous year are

summarized in the table below: The firm's monthly permanent funds requirement is ________. (See Table 15.1)

Question 14 options:

	$140,000
	$157,500
	$57,500
	$100,000

Question 15 (1 point)

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In an aggressive financing strategy, a firm anticipating a large increase in sales for the coming period should finance the increase in working capital with ________.

Question 15 options:

	the sale of a bond issue
	the sale of common stock
	a line of credit
	a long-term note from the bank

Question 16 (1 point)

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Which of the following securities is a government issue?

Question 16 options:

	federal agency issues
	certificate of deposits
	repurchase agreements
	eurodollar deposits

Question 17 (1 point)

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The cash conversion cycle is the total number of days in the operating cycle less the average payment period for inputs to production.

Question 17 options:

	True
	False

Question 18 (1 point)

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________ involves the strategic use of mailing points and bank accounts to lengthen mail and clearing floats.

Question 18 options:

	Concentration banking
	A direct send
	Controlled disbursing
	A lockbox

Question 19 (1 point)

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In the EOQ model, the total cost is minimized at the point where the order costs and carrying costs are equal.

Question 19 options:

	True
	False

Question 20 (1 point)

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

Question 20 options:

	True
	False