Question 1

Spice it Up! writes 57 checks a day with an average amount of $289 each.These checks generally clear the bank in 2.7 days.In addition,the firm generally receives an average of $20,900 a day in checks that are deposited immediately.Deposited funds are available in an average of .5 days.What is the firm's net float?

Accepted Answer

A)  Net disbursement float of $36,318
B)  Net disbursement float of $34,027.10
C)  Net disbursement float of $34,750.30
D)  Net collection float of $36,318
E)  Net collection float of $34,027.10F) A) and B)
G) None of the above

Question 2

Which one of the following will tend to increase the length of the credit period?

Accepted Answer

A)  Decrease in product cost
B)  Decrease in consumer demand
C)  Decrease in collateral value
D)  Increase in credit risk
E)  Increase in product standardizationF) C) and D)
G) A) and C)

Question 3

On June 22,Roy's Welding Shop purchased $2,618 worth of goods.The terms of the sale were 2/15,net 45.What is the effective annual rate of interest for the credit period for this sale?

Accepted Answer

A)  27.86 percent
B)  31.38 percent
C)  29.42 percent
D)  25.73 percent
E)  28.63 percentF) A) and B)
G) A) and C)

Question 4

Which one of the following is a special post office mailbox that is used to speed up the collection of accounts receivable payments?

Accepted Answer

A)  Separation box
B)  Cash box
C)  Concentration account
D)  Lockbox
E)  Float boxF) A) and E)
G) A) and D)

Question 5

KL Textiles writes 22 checks a day for an average amount of $827 each.These checks generally clear the bank 3.5 days after they are written.In addition,the firm generally receives an average of $23,902 a day in checks.Deposited amounts are available after one day.What is the amount of the firm's disbursement float?

Accepted Answer

A)  $11,951
B)  $23,902
C)  $39,777
D)  $29,840
E)  $63,679F) C) and D)
G) A) and E)

Question 6

Outdoors Woods has annual credit sales of $14.38 million.The average collection period is 12 days.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.

Accepted Answer

A)  $446,000
B)  $524,000
C)  $408,888
D)  $472,767
E)  $393,134F) B) and C)
G) B) and E)

Question 7

Which of these refers to a customer's willingness to meet his or her credit obligations?

Accepted Answer

A)  Capital
B)  Conditions
C)  Capacity
D)  Character
E)  CollateralF) B) and E)
G) A) and B)

Question 8

Al's Bakery has a checkbook balance of $1,650.A $700 deposit was made today and will be added to the available balance tomorrow.There are two outstanding checks that total to $623 that should clear tomorrow.There are no other outstanding items.Which one of the following statements accurately reflects this situation?

Accepted Answer

A)  The disbursement float is $1,650.
B)  The firm's current available balance is equal to $1,650 plus $700 minus $623.
C)  The firm's collection float exceeds its disbursement float.
D)  The firm's available balance is greater than its book balance.
E)  The firm has a net disbursement float.F) All of the above
G) A) and E)

Question 9

The process of determining the probability that potential customers will not pay is called:

Accepted Answer

A)  credit analysis.
B)  collection policy.
C)  account aging.
D)  credit terms.
E)  customer invoicing.F) All of the above
G) B) and E)

Question 10

Which of these is evidence of indebtedness?

Accepted Answer

A)  Terms of sale
B)  Credit cost curve
C)  Credit instrument
D)  Concentration policy
E)  Credit policyF) A) and E)
G) B) and E)

Question 11

Credit scoring is the:

Accepted Answer

A)  categorizing of customers into groups based on the length of time it takes each customer to pay for purchases.
B)  compiling of a list of accounts receivables segregated by the length of time each receivable has been outstanding.
C)  evaluation of the opportunity costs of a credit policy.
D)  process of quantifying the probability of default when granting credit to customers.
E)  tracking of both the number and the size of customer orders over a period of time.F) D) and E)
G) A) and D)

Question 12

The economic order quantity approach states that inventory order sizes should be determined by:

Accepted Answer

A)  dividing annual item sales by the carrying cost per item and multiplying by 2.
B)  computing the average number of items sold each month.
C)  equating restocking costs with carrying costs.
D)  dividing the inventory into various groups based on the value per item.
E)  computing the amount of the derived demand.F) B) and D)
G) None of the above

Question 13

What is the key difference between an ordinary preferred stock and a money market preferred stock?

Accepted Answer

A)  Issuer
B)  Maturity
C)  Fixed versus floating dividend
D)  Voting rights
E)  Absence of any dividendF) A) and B)
G) B) and E)

Question 14

Which statement is true concerning a controlled disbursement account?

Accepted Answer

A)  The number of checks that can be disbursed on any one day is limited.
B)  The bank will inform the firm of the amount that needs to be transferred on a daily basis.
C)  The amount that can be disbursed on any given day is limited to the balance in the account when the bank opens in the morning.
D)  The total number of checks that can be written in any one month is limited.
E)  The amount of the disbursements is limited to the amount the firm has available on its bank line of creditF) B) and E)
G) A) and B)

Question 15

Which one of the following is a system for managing demand-dependent inventories that minimizes the amount of inventory on hand?

Accepted Answer

A)  Inventory flow log
B)  Materials requirements planning
C)  Just-in-time inventory system
D)  Kanban
E)  KeiretsuF) A) and E)
G) A) and B)

Question 16

You place an order for 1,200 units of widgets at a unit price of $19.99.The supplier offers terms of 2/5,net 20.If you don't take the discount,how much interest on your order are you paying implicitly?

Accepted Answer

A)  $468.33
B)  $479.76
C)  $492.00
D)  $460.04
E)  $564.80F) A) and B)
G) A) and C)

Question 17

Which of these is the most ethical practice related to cash disbursement management?

Accepted Answer

A)  Intentionally delaying payments by creating a complex accounts payable system
B)  Taking the cash discount but paying after the discount period
C)  Paying a supplier from a zero-balance account
D)  Purposely losing a supplier's invoice and requiring the supplier to submit another copy
E)  Mailing a check from the most remote location possibleF) B) and C)
G) A) and E)

Question 18

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

Accepted Answer

A)  terms of sale.
B)  receivables factors.
C)  five Cs of credit.
D)  collection policy determinants.
E)  credit scores.F) A) and B)
G) B) and E)

Question 19

A firm offers credit terms of 1/5,net 25.How long is the net credit period?

Accepted Answer

A)  1 day
B)  5 days
C)  20 days
D)  25 days
E)  30 daysF) All of the above
G) C) and D)

Question 20

Lockboxes should be located:

Accepted Answer

A)  in every town where a firm has a customer.
B)  geographically close to a firm's primary customers.
C)  only in major urban areas since those are the key financial areas of the country.
D)  close to a firm's home office.
E)  only in cities where the firm has regional offices.F) C) and D)
G) A) and E)

Exam 17: Working Capital Management

What is the key difference between an ordinary preferred stock and a money market preferred stock?

Correct Answer
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The process of determining the probability that potential customers will not pay is called:

Correct Answer
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Correct Answer
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Correct Answer
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On June 22,Roy's Welding Shop purchased $2,618 worth of goods.The terms of the sale were 2/15,net 45.What is the effective annual rate of interest for the credit period for this sale?

Correct Answer
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Which of these is the most ethical practice related to cash disbursement management?

Correct Answer
verified

A firm offers credit terms of 1/5,net 25.How long is the net credit period?

Correct Answer
verified

Lockboxes should be located:

Correct Answer
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Which one of the following is a system for managing demand-dependent inventories that minimizes the amount of inventory on hand?

Correct Answer
verified

Which one of the following is a special post office mailbox that is used to speed up the collection of accounts receivable payments?

Correct Answer
verified

Correct Answer
verified

Outdoors Woods has annual credit sales of $14.38 million.The average collection period is 12 days.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.

Correct Answer
verified

You place an order for 1,200 units of widgets at a unit price of $19.99.The supplier offers terms of 2/5,net 20.If you don't take the discount,how much interest on your order are you paying implicitly?

Correct Answer
verified

Which of these refers to a customer's willingness to meet his or her credit obligations?

Correct Answer
verified

Which statement is true concerning a controlled disbursement account?

Correct Answer
verified

The economic order quantity approach states that inventory order sizes should be determined by:

Correct Answer
verified

Which of these is evidence of indebtedness?

Correct Answer
verified

Credit scoring is the:

Correct Answer
verified

Which one of the following will tend to increase the length of the credit period?

Correct Answer
verified

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

Correct Answer
verified

Exam 17: Working Capital Management

What is the key difference between an ordinary preferred stock and a money market preferred stock?

Correct AnswerverifiedShow Answer

The process of determining the probability that potential customers will not pay is called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On June 22,Roy's Welding Shop purchased $2,618 worth of goods.The terms of the sale were 2/15,net 45.What is the effective annual rate of interest for the credit period for this sale?

Correct AnswerverifiedShow Answer

Which of these is the most ethical practice related to cash disbursement management?

Correct AnswerverifiedShow Answer

A firm offers credit terms of 1/5,net 25.How long is the net credit period?

Correct AnswerverifiedShow Answer

Lockboxes should be located:

Correct AnswerverifiedShow Answer

Which one of the following is a system for managing demand-dependent inventories that minimizes the amount of inventory on hand?

Correct AnswerverifiedShow Answer

Which one of the following is a special post office mailbox that is used to speed up the collection of accounts receivable payments?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Outdoors Woods has annual credit sales of $14.38 million.The average collection period is 12 days.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.

Correct AnswerverifiedShow Answer

You place an order for 1,200 units of widgets at a unit price of $19.99.The supplier offers terms of 2/5,net 20.If you don't take the discount,how much interest on your order are you paying implicitly?

Correct AnswerverifiedShow Answer

Which of these refers to a customer's willingness to meet his or her credit obligations?

Correct AnswerverifiedShow Answer

Which statement is true concerning a controlled disbursement account?

Correct AnswerverifiedShow Answer

The economic order quantity approach states that inventory order sizes should be determined by:

Correct AnswerverifiedShow Answer

Which of these is evidence of indebtedness?

Correct AnswerverifiedShow Answer

Credit scoring is the:

Correct AnswerverifiedShow Answer

Which one of the following will tend to increase the length of the credit period?

Correct AnswerverifiedShow Answer

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

Correct AnswerverifiedShow Answer

Correct Answer
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