The economic order quantity method of inventory management identifies the optimal inventory level by:

Multiple Choice

• Determining exactly the amount of inventory needed on a given day.

• Subdividing the inventory into three categories based on item cost.

• Computing the cost of the inventory sold on an average day.

• Equating inventory restocking costs with the costs of carrying inventory.

• Equating the cost of inventory with the monthly average cost of goods sold.

Which of the following would NOT be a part of an EOQ model of inventory management?

Multiple Choice

• Safety stocks.

• Reorder points.

• Carrying costs.

• Shortage costs.

• Bond yields.

Which of the following is the best definition of an aging schedule.

Multiple Choice

• Procedures followed by a firm in collecting accounts receivable.

• Wholly owned subsidiary that handles credit extension and receivables financing through commercial paper.

• A discount given for a cash purchase.

• Conditions on which a firm sells its goods and services for cash or credit.

• A compilation of accounts receivable by the age of each account.

The NPV that is calculated when deciding whether to lease an asset or to buy it is called the:

Multiple Choice

• Depreciation net present value.

• Profitability index.

• Open interest net present value.

• Average accounting ratio for leasing.

• Net advantage to leasing.

One legitimate advantage to leasing is that:

Multiple Choice

• Leasing provides a source of off-balance sheet financing.

• Leasing provides 100% financing.

• By leasing, the lessee's income statement will be stronger.

• Taxes may be reduced by leasing.

• Unlike borrowing and purchase, leasing decreases a firm's financial leverage.

The reason for "hiding" a financial lease is the hope that the lease:

Multiple Choice

• Can be resold without the lessor knowing.

• Term can be extended if the lessee continues to make payments such that the lessor does not realize the lease term has expired.

• Can be treated as an operating lease for tax purposes without the CRA realizing it is a financial lease.

• Will go unnoticed by analysts and investors.

• Payments can be hidden from the CRA.