Total Ghana has a temporary need for funds. Management is trying to decide between taking discounts from one of their suppliers or a 14.75% per annum renewable discount loan from its bank for 3 months. The suppliers' terms are as follows. GNPC 1/10, net 30. BOST 2/15, net 60. Tema Oil Refinery net 90. Assume 360-day year, the cheapest source of short-term financing is * (a) The bank (b) GNPC (c) BOST (d) Tema Oil refinery 16. Which of the following is not a major function in cash management * (a) Maximising sales (b) cash surplus investment (c) obtaining financial services (d) Cash flow control 17. The goal of credit policy is to * (a) minimise bad debt losses (b) minimise collection expenses (c) maximise sales (d) Extend credit to the point where marginal profits equal marginal costs 18. The optimal level of working capital is that which provides a 2:1 ratio of current assets to current liabilities. * (a) True (b) False 19. An increase in sales resulting from an increased cash discount for prompt payment would be expected to cause * (a) an increase in the operating cycle (b) an increase in the average collection period (c) a decrease in the cash conversion cycle (d) a decrease in purchase discounts taken 20. Suppose the credit terms offered to Fan Milk Ltd by their suppliers are 2/10, net 30 days. Out of convenience, Fan Milk Ltd firm is not taking discounts, but is paying after 20 days, instead of waiting until Day 30. What is the cost to Fan Milk for not taking the discount? Assume 360-day period * (a) 36.73% (b) 36% (c) 24.49% (d) 24% 21. Opoku Trading Ltd contacted a supplier to provide 50,000 shoes. The supplier asked Opoku Trading to provide the following: current position in the industry, expected market share and competitive climate for its products. Which of the 6C's of credit was the supplier evaluating? * (a) Capacity (b) Conditions (c) Character (d) Collateral 22. When discounts are offered by suppliers, Economic Order Quantity should not be used as inventory management technique * (a) True (b) False 23. Mr Francis, a sole trader was buying inventories from a supplier on credit but he was asked to provide his driver's license. Which of the 6C's of credit was the supplier evaluating? * (a) Character (b) Capacity (c) Conditions (d) Control 24. Working capital policy that advocates for high level of trade receivables, inventory and cash is referred to as * (a) Conservative (a) Aggressive (c) Matching (d) Conversion 25. Payment to creditors is a manifestation of cash held for * (a) Transaction motive (b) Speculative motive (c) Precautionary motive (d) intentional motive 26. Cash Discount term 4/20, net 40 means * (a) 20% Discount if payment is made in 4 days, otherwise full payment in 40 days (b) 4% Interest if payment is made in 40 days and 20%, interest thereafter (c) ) 4% Discount if payment is made in 20 days, otherwise full payment in 40 days, (d) 4% Discount if payment is made between 20 and 40 days 27. KFC Ltd wants to maintain the following records for the next period. Trade receivable collection period 45 days. Sales GHc400,000. Cost of Sales Ghc100,000. Inventory GHc50,000. Cash GHc80,000. Trade payable GHc70,000. What is the working capital requirement? Assume 360 day-period * (a) GHc60,000 (b) GHc110,000 (c) GHc100,000 (d) GHc90,000 28. TOR offers credit terms of 2/20, net 60 to GOIL Ltd. GOIL Ltd has an inventory period of 15 days and an operating cycle of 45 days. Given this, which of the following statements are correct. (I) The credit terms of TOR are too restrictive (II) if GOIL forgoes the discount on its purchases, it will have a negative cash cycle (III)TOR is financing the accounts receivable of GOIL (IV) If GOIL is delinquent in its payment, TOR should be concerned * (a)I, III, and IV only (b) II, III, and IV only (c) I, II, III, and IV (d) III and IV only 29. Which one of the following statements is correct concerning the accounts payable period? * (a) The accounts payable period is equal to the cost of goods sold divided by the average accounts payable (b) Managers generally prefer a shorter accounts payable period than a longer one. (c)Extending the accounts payable period effectively decreases the cash needs of a firm. (d) Increasing the accounts payable turnover rate increases the accounts payable period. 30. The accounts receivable turnover rate for Fan Milk Ltd. has gone from an average of 9 times to 12 times per year. Assume a 360-day period. The trade receivables collection period will * (a) increase by 10 days (b) decrease by 10 days (c) decrease by 3 days (d) decrease by 30 days