Your firm needs to borrow $50,000 for one year. Which of the following loan options offers the least cost?

Select one:

A. 13 ? % simple interest

B. 10 ? % discount interest with a 10% compensating balance requirement

C. 12 ? % discount interest

D. 11% simple interest with a 20% compensating balance requirement

Question 6

Not yet answered

Marked out of 1.00

Flag question

Question text

A firm changes its credit policy from 2/10, net 30, to 3/10, net 30. The change is meant to match the competition??s recent changes, so no increase in sales is expected. Average accounts receivable will probably decline as a result of this change.

Select one:

True

False

Question 7

Not yet answered

Marked out of 1.00

Flag question

Question text

Which of the following statements is most correct?

Select one:

A. Trade credit is provided to a business when purchases are made

B. Short-term debt, while often cheaper than long-term debt, exposes a firm to the potential problem associated with interest rate risk

C. Both statements 1 and 2 are false

D. Both statements 1 and 2 are correct

Question 8

Not yet answered

Marked out of 1.00

Flag question

Question text

Accruals represent a spontaneous source of funding but, unfortunately, due to law and economic forces, firms have little control over the level of these accounts.

Select one:

True

False

Question 9

Not yet answered

Marked out of 1.00

Flag question

Question text

On a typical day a firm writes $10,000 in checks. It generally takes 4 days for these checks to clear. Each day the firm typically receives $10,000 in checks that take 3 days to clear. What is the firm??s net float?

Select one:

A. $ 30,000 negative

B. $10, 000 negative

C. $10,000 positive

D. $40,000 positive

Question 10

Not yet answered

Marked out of 1.00

Flag question

Question text

The principal goal of most inventory management systems is to balance the costs of ordering, shipping, and receiving goods with the cost of carrying those goods, while simultaneously meeting the firm's policy with respect to avoiding running short of stock and disrupting production schedules.

Select one:

True

False

Question 11

Not yet answered

Marked out of 1.00

Flag question

Question text

Determining the appropriate amount of total current assets and the amount in specific asset accounts, as well as their financing, are basic elements of working capital policy.

Select one:

True

False

Question 12

Not yet answered

Marked out of 1.00

Flag question

Question text

A company has sales of $2 million per year (all credit) and its days sales outstanding is 35 days, what is its average amount of accounts receivable outstanding (assume a 360-day year)?

Select one:

A. $194,444

B. $ 57,143

C. $ 97,222

D. $212,541

Question 13

Not yet answered

Marked out of 1.00

Flag question

Question text

Inventory financing can take the form of a

Select one:

A. blanket lien

B. trust receipt

C. warehouse receipt

D. all of the above

Question 14

Not yet answered

Marked out of 1.00

Flag question

Question text

A company requires a $100,000 annual loan and borrows on a discount interest basis at a nominal annual rate of 11 percent. If the company must actually receive $100,000 net proceeds, then what must be the face value of the note?

Select one:

A. $ 89,000

B. $100,000

C. $111,000

D. $112,360

Question 15

Not yet answered

Marked out of 1.00

Flag question

Question text

A firm receives an average of $1,400,000 in payments per day. On average, it takes 5 days from the time customers mail payments until the firm is able to receive, process, and deposit them. The firm would like to set up a lockbox collection system that it estimates would reduce float by 3 days. If the firm's cost of capital is 10%, what is the maximum monthly fee the firm can pay?

Select one:

A. $350,000

B. $35,000

C. $23,333

D. $420,000