Question 1(0.2 points)

Which of the following statements is NOT true?

Question 1 options:

To measure the cash conversion cycle, we need another measure called the days' payables outstanding.

The cash conversion cycle begins when a firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.

The cash conversion cycle begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

The cash conversion cycle ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by a firm to pay for its purchases.

Question 2(0.2 points)

Which of the following statements is NOT true?

Question 2 options:

The level of the cash balance has no bearing on a firm's ability to meet its short-term financial obligations.

The lower the cash balance, the better the ability of a firm to meet its short-term financial obligations.

If cash balances become too small, it may lead the firm to bankruptcy.

The downside of holding too much cash is that the returns on cash are low.

Question 3(0.2 points)

A restrictive current asset investment strategy calls for

Question 3 options:

tight terms of sale intended to curb credit sales and accounts receivable.

levels of current assets kept to a minimum.

All of these.

a firm barely investing in cash, marketable securities and inventory.

Question 4(0.2 points)

A lockbox system allows geographically dispersed customers to send their payments to a post office box close to them.

Question 4 options:

TrueFalse

Question 5(0.2 points)

An informal line of credit is short term debt promissory notes issued by large financial firms.

Question 5 options:

TrueFalse

Question 6(0.2 points)

The aging schedule shows the breakdown of the firm's accounts receivable by their date of sale.

Question 6 options:

TrueFalse

Question 7(0.2 points)

Use the following information to answer questions 39-40:

You are provided the following working capital information for the Ridge Company:

Ridge Company

Account

Inventory$12,890

Accounts receivable12,800

Accounts payable12,670

Credit sales$124,589

Cost of goods sold99,630

What is the cash conversion cycle for Ridge Company? Round your final answers to one decimal place.

Question 7 options:

38.3 days

129.9 days

46.4 days

83.5 days

Question 8(0.2 points)

Rocky Corp. has daily sales of $18,100. The financial manager determined that a lockbox would reduce the collection time by 2.2 days. Assuming the company can earn 6 percent interest per year, what are the savings from the lockbox? Round your final answer to the nearest dollar.

Question 8 options:

$1,100

$3,621

$39,820

$2,389

Question 9(0.2 points)

A firm that employs just-in-time management has to increase its investment in working capital.

Question 9 options:

TrueFalse

Question 10(0.2 points)

Reference 14-2: Use the following to answer questions 60-61:

Jensen Autos, one of the largest car dealers in Eau Claire, sells about 700 vehicles a year. The cost of placing an order with their supplier is $1,100, and the inventory carrying costs are $120 for each car. Most of their sales are in late fall of each year.

What is the number of cars per order? Round your final answer to the nearest whole number.

Question 10 options:

80 cars

58 cars

101cars

113 cars

Question 11(0.2 points)

Which of the following statements about maturity matching strategy is true?

Question 11 options:

All fixed assets are funded with long-term financing.

All seasonal working capital needs are funded with short-term borrowing.

All of these

As the level of sales varies seasonally, short-term borrowing fluctuates with the level of seasonal working capital.

Question 12(0.2 points)

Which of the following statements is true when managing working capital accounts?

Question 12 options:

Delay paying accounts payable as long as possible without suffering any penalties.

Maintain minimal raw material inventories without causing manufacturing delays.

All of these are true.

Use as little labor as possible to manufacture the product while producing a quality product.

Question 13(0.2 points)

Trend Foods distributes its products to more than 100 restaurants and delis. The company's collection period is 32 days, and it keeps its inventory for 10 days. What is Trend's operating cycle?

Question 13 options:

None of these

22 days

42 days

32 days

Question 14(0.2 points)

Which of the following statements about collection time is NOT true?

Question 14 options:

Collection time can be broken down into three components.

Collection time, or float, is the time between when a customer makes a payment and when the cash becomes available to the firm.

Delivery time or mailing time is not part of the collection time.

Processing delay is one of the components of the collection time.

Question 15(0.2 points)

Serengeti Travels has borrowed $50,000 at a stated APR of 8.5 percent. The loan calls for a compensating balance of 8 percent. What is the effective interest rate for this company? Round your final percentage answer to two decimal places.

Question 15 options:

8.00%

8.50%

9.24%

16.50%

Question 16(0.2 points)

The appropriate mix of current assets is not a working capital management decision.

Question 16 options:

TrueFalse

Question 17(0.2 points)

Renald Corp. estimates thatthe company takes 27 days on average to pay off its suppliers. It also knows that it has days' sales in inventory of 43 days and days sales' outstanding of 45 days. What is its cash conversion cycle?

Question 17 options:

115 days

46 days

61 days

57 days

Question 18(0.2 points)

In which of the following forms of business organization access to capital is the least?

Question 18 options:

An S-corporation

A general partnership

A C-corporation

A sole proprietorship

Question 19(0.2 points)

Which of the following is NOT true about the capital budgeting process?

Question 19 options:

All of these

Rapid growth is considered a desirable achievement in capital budgeting decisions.

Management identifies a list of potential projects that are consistent with the business strategy and ranks them according to the value they would create for the shareholders.

Once the list is made, no management review can change it.

Question 20(0.2 points)

Which of the following statements about the free cash flow from the firm (FCFF) approach is true?

Question 20 options:

The present value of these cash flows exceeds the total value of the firm, or its enterprise value.

The total value of the firm, VF, is computed as the present value of the FCFF, discounted by the firm's weighted average cost of capital, WACC.

We include the cash necessary to pay short-term liabilities that do not have interest charges associated with them, such as accounts payable and accrued expenses.

The costs associated with noninterest-bearing current liabilities, which are included in the firm's cost of sales and other operating expenses, are added in the calculation of FCFF.

Question 21(0.2 points)

As sales increase, a firm needs to _____ proportionately to support the _____.

Question 21 options:

increase the level of fixed assets; increase the level of inventory

increase the level of inventory; higher sales level

None of these

increase the level of inventory; increase the level of fixed assets

Question 22(0.2 points)

The sustainable growth rate is the rate of growth that a firm can sustain without selling additional equity while maintaining the same capital structure.

Question 22 options:

TrueFalse

Question 23(0.2 points)

A cash budget summarizes the cash flows into and out of a firm over a period of time.

Question 23 options:

TrueFalse

Question 24(0.2 points)

In the free cash flow to equity (FCFE) approach, an analyst values the free cash flows that the assets of the firm are expected to produce in the future.

Question 24 options:

TrueFalse

Question 25(0.2 points)

Nederland Finance Company has total assets worth $9,751,223. It is expecting to grow its revenue at a rate of 20 percent next year and will have a net income of $2,213,564 next year. The firm pays out 65 percent of its net income as dividends. What is the external financing needed by this firm to meet its growth expectations?

Question 25 options:

None of these

$1,175,497.20

No external funding is needed.

$511,428.00

Question 26(0.2 points)

Mercantile Co. has net income of $3,413,500 on assets of $16,109,445 and retains 55 percent of its income every year. What is the company's internal growth rate? (Do not round intermediate calculations. Round final answer to two decimal places.)

Question 26 options:

11.65%

21.21%

8.62%

9.43%

Question 27(0.2 points)

_____ is a road map for a business.

Question 27 options:

A cash budget

A transaction analysis

A cash flow break-even analysis

A business plan

Question 28(0.2 points)

Starting a business is less risky than buying and growing a business that someone else has already established.

Question 28 options:

TrueFalse

Question 29(0.2 points)

Which of the following statements is NOT true?

Question 29 options:

The higher the retained earnings generated by a firm, the higher the growth possible without using external funding.

Given the same level of retained earnings, a firm that has the higher amount of total assets has a higher growth possibility without using external funding.

The internal growth rate (IGR) is defined as the maximum growth rate that a firm can achieve without external financing.

All of these

Question 30(0.2 points)

Sterling Resorts Co. has total assets worth $13,442,975. It is expecting to grow its revenue at a rate of 25 percent next year. For next year, it expects a net income of $3,475,321 and will pay out 45 percent as dividends. What is the external financing needed by the firm to meet its growth expectations?

Question 30 options:

None of these

No external funding is needed.

$1,449,317.20

$1,796,849.30

Question 31(0.2 points)

Swan Supply Company has net income of $1,212,335 on assets of $12,522,788 and retains 70 percent of its income every year. What is the company's internal growth rate? (Do not round intermediate calculations. Round final answer to one decimal place.)

Question 31 options:

8.6%

6.8%

7.6%

9.3%

Question 32(0.2 points)

Comacho Traders has total assets of $513,480 and sales of $723,062. What is the firm's capital intensity ratio? (Round to two decimal places.)

Question 32 options:

1.23

1.41

None of these

0.71

Question 33(0.2 points)

The founder of a company needs to be a part of many critical decisions taken by the board but need not be a part of any related to strategies to sell the firm's products.

Question 33 options:

TrueFalse

Question 34(0.2 points)

Cost approaches include replacement cost and multiples analysis.

Question 34 options:

TrueFalse

Question 35(0.2 points)

The life of an entity is flexible for:

Question 35 options:

a general partnership.

an S-corporation.

a sole proprietorship.

a C-corporation.

Question 36(0.2 points)

Which of the following statements is true of cash flow break-even analysis?

Question 36 options:

As per the cash flow break-even analysis, the cash flow break-even point calculation usually focuses on the computation of EAT break-even.

It summarizes the cash flows into and out of a firm, usually on monthly basis.

It is useful in understanding the cash requirements of a business and in estimating how much financing a new business will require.

It helps an entrepreneur in understanding where the money is coming from and where it is going.

Question 37(0.2 points)

Mandolin Bottlers Co. has net income of $4,272,335 and retains 65 percent of its income every year. If the company's internal growth rate is 8.6 percent, what is the firm's total assets? (Round your answer to the nearest dollar.)

Question 37 options:

$238,824

None of these

$30,388,235

$32,290,904

Question 38(0.2 points)

A financial plan includes

Question 38 options:

the strategic plan, financing plan, and options plan.

None of these

the financing plan, investment plan, and options plan.

the strategic plan, investment plan, and financing plan.

Question 39(0.2 points)

Which of the following statements is NOT true?

Question 39 options:

The higher the capital intensity ratio, the more capital a firm needs to generate sales.

Firms that have high capital intensive ratios are riskier than similar firms that use less fixed assets.

The ratio of sales to total equity is called the capital intensity ratio.

The ratio of total assets to sales is called the capital intensity ratio.

Question 40(0.2 points)

In putting together a financial plan, management addresses three main issues through their strategic plan, investment plan, and financing plan.

Question 40 options:

TrueFalse

Question 41(0.2 points)

Which of the following statements is NOT true?

Question 41 options:

Sales forecasts models are typically very basic and use no complicated analysis.

Sales forecasts utilize economic variables as input.

Sales forecasts are generated within a firm.

All of these

Question 42(0.2 points)

Fixed assets vary directly with sales when firms are operating at less than full capacity.

Question 42 options:

TrueFalse

Question 43(0.2 points)

Drekker, Inc. has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders. Find the firm's dividend payout ratio and retention ratio. (Round your percentage answers to nearest whole number.)

Question 43 options:

55%, 45%

85%, 15%

15%, 85%

45%, 55%

Question 44(0.2 points)

Which of the following statements is NOT true for a firm that operates below full capacity?

Question 44 options:

Fixed assets per unit can be incrementally changed.

Fixed assets will not vary directly with sales.

All of these

Fixed assets can vary directly with sales.

Question 45(0.2 points)

In the transaction analysis approach, analysts use the information on what someone has paid for a comparable company in a merger or an acquisition to estimate a value for the firm.

Question 45 options:

TrueFalse

Question 46(0.2 points)

Which of the following mathematical expressions is used while calculating the value of a firm using the income approach?

Question 46 options:

The present value of the free cash flows (FCF) that a business is expected to produce over the next T years - The present value of all free cash flows after year T + The value of all of the nonoperating assets in the firm

The present value of the free cash flows (FCF) that a business is expected to produce over the next T years + The present value of all free cash flows after year T - The value of all of the nonoperating assets in the firm

The present value of the free cash flows (FCF) that a business is expected to produce over the next T years + The present value of all free cash flows after year T + The value of all of the nonoperating assets in the firm

The present value of the free cash flows (FCF) that a business is expected to produce over the next T years - The present value of all free cash flows after year T - The value of all of the nonoperating assets in the firm

Question 47(0.2 points)

Financial planning models

Question 47 options:

help management make investment decisions.

make the analysis faster and accurate.

help management make financing decisions.

All of these

Question 48(0.2 points)

The cash flow break-even analysis helps identify how much money will be needed to launch a new product or business.

Question 48 options:

TrueFalse

Question 49(0.2 points)

A strategic investor is interested in buying the firm and not just its financial performance.

Question 49 options:

TrueFalse

Question 50(0.2 points)

If Merton Corp. has a ROE of 23.4 percent, what is the plowback ratio needed to achieve a sustainable growth rate of 7 percent? (Round to nearest whole number.)

Question 50 options:

34%

24%

30%

28%