Question 7

A firm offers credit terms of 3/15, net 20 to its customers, which means the firm allows its customers to:

Selected Answer:

A.

take a 15 percent discount on the invoice price if payment is made on or before Day 20 of the billing cycle; after that, only a 3 percent discount will be available.

B.

take a 20 percent discount on the invoice price if payment is made on or before Day 15 of the billing cycle; after that, only a 3 percent discount will be available.

C.

take a 3 percent discount on the invoice price if payment is made on or before Day 15 of the billing cycle; otherwise, the entire bill is due by Day 20.

D.

take a 15 percent discount on the invoice price if payment is made on or before Day 3 of the billing cycle; otherwise, the entire bill is due by Day 20.

E.

take a 20 percent discount on the invoice price if payment is made on or before Day 3 of the billing cycle; otherwise, the entire bill is due by Day 15.

Question 8

The following information relates to Zync Corporation.

Currentassets$200,000

Currentliabilities$150,000

Long-term assets$600,000

Long-term liabilities$400,000

Based on this information, the net working capital of the company is:

A.

$200,000.

B.

$50,000.

C.

$250,000.

D.

$10,000,000.

Question 9

If a firm does not meet its forecasted sales level, then leverage will result in a magnified loss in income compared to what is expected because:

Selected Answer:

A.

retained earnings will increase rapidly.

B.

inventories will be built very slowly.

C.

production facilities will be expanded greatly.

D.

additional external funds needed will be reduced.

E.

sales operations will be reduced drastically.

Question 10

Net working capital is equal to:

A.

current assets minus current liabilities.

B.

current assets.

C.

current assets divided by current liabilities.

D.

current liabilities.

E.

current assets plus current liabilities.

Question 11

Which of the following actions is taken to reduce the collections period for receivables of a firm?

A.

Increasing the sales of the firm

B.

Decreasing the purchases of the firm

C.

Modifying the credit policy of the firm

D.

Changing the inventory valuation method of the firm

E.

Revising the working capital policy of the firm