Under which circumstance would a company want to reexamine its level of working capital?

• a.)
• If a company has sufficient operating liquidity
• b.)
• If a company has positive working capital
• c.)
• If a company has excessive capital invested in the short term
• d.)
• If a company's current assets exceed its current liabilities

Which of the following is a goal of working capital management?

• a.)
• To accumulate as much cash and cash equivalents as possible
• b.)
• To minimize the cash conversion cycle and, if possible, invert it
• c.)
• To maximize profitability at the expense of liquidity
• d.)
• To balance profitability and liquidity in order to meet growth objectives

A company has a 120-day operating cycle with 80 inventory days, 40 receivable days and 15 payable days.

What is their cash conversion cycle?

• a.)
• 25
• b.)
• 105
• c.)
• 55
• d.)
• 135

When managing collections, a company can make use of lockbox banking to __________.

• a.)
• send invoices to customers more quickly
• b.)
• decrease the number of customers that default on their payments
• c.)
• speed up the receipt of customers' payments
• d.)
• increase processing float for customers' payments

Which of the following describes derivatives, rather than debt securities or equity securities?

• a.)
• They are sold on a public exchange.
• b.)
• Their value tracks with the performance of an underlying entity.
• c.)
• They usually generate the lowest returns.
• d.)
• They provide a company with easy access to capital.

Place the following steps for developing a credit policy in the correct order of process:

• A: The company purchases trade credit insurance to protect against bad debts.
• B: The company decides to offer a discount to customers who pay within 15 days.
• C: The company decides that it wants to minimize its losses due to bad debts.
• a.)
• C, B, A
• b.)
• B, A, C
• c.)
• C, A, B
• d.)
• A, C, B

Which inventory technique measures inventory by dividing the total cost of goods available for sale by the total number of units in a period?

• a.)
• LIFO
• b.)
• ABC
• c.)
• Average cost
• d.)
• FIFO

Sumayyah wants to expand her successful T-shirt printing business, but she needs extra capital. She finances the expansion by asking her suppliers to extend the period of time before she must pay them for their goods.

What type of financing resource is Sumayyah using?

• a.)
• Trade credit
• b.)
• Peer-to-peer lending
• c.)
• Factoring
• d.)
• Commercial lending

Lester is concerned about a stock in his portfolio because the dividend he just received exceeded the company's earnings per share for the same period.

What financial metric is Lester analyzing?

• a.)
• Dividend yield
• b.)
• Dividend per share
• c.)
• Dividend cover
• d.)
• Payout ratio

Why might a relatively new technology start-up prefer not to issue dividends?

• a.)
• In order to attract a specific clientele like retirees
• b.)
• In order to signal to investors that the company is on sound financial footing
• c.)
• In order to retain earnings and reinvest in growth
• d.)
• In order to preserve information asymmetry

According to the residual dividend model, what would a company do if its net income is less than its financing needs for planned projects?

• a.)
• Determine if investors prefer cash of stock dividends
• b.)
• Distribute the same dividend as in the past, for the sake of consistency
• c.)
• Distribute no cash dividends
• d.)
• Set a target payout ratio

Eadie owns 300 shares of stock in Company A that were valued at $2/share.

After Company A announces a 3-to-1 reverse stock split, Eadie calculates that she will own __________.

• a.)
• 100 shares valued at $2/share
• b.)
• 100 shares valued at $6/share
• c.)
• 900 shares valued at $0.67/share
• d.)
• 900 shares valued at $2/share