Question 1

Cash concentration is best defined as:

Accepted Answer

A)  combining an entire firm's daily receipts into one bank deposit.
B)  combining a week's worth of cash receipts into one bank deposit.
C)  combining cash from multiple bank accounts into a firm's main bank accounts.
D)  using multiple lockboxes for collecting cash payments.
E)  combining a firm's bills so that disbursement checks are mailed only monthly.F) B) and D)
G) B) and E)

Question 2

LD&M sells earnings forecasts for international securities.Its credit terms are 1/3,net 15.Based on experience,84 percent of all customers take the discount.What is the average collection period?

Accepted Answer

A)  4.42 days
B)  4.92 days
C)  5.08 day
D)  4.57 days
E)  4.08 daysF) A) and D)
G) C) and D)

Question 3

The terms of sale are best defined as the:

Accepted Answer

A)  total invoice amount including all shipping costs and taxes.
B)  period of time during which a sale price applies.
C)  legal documents related to the credit sale of either goods or services.
D)  conditions under which a firm sells its goods or services for either cash or credit.
E)  process used to determine which customers will be granted credit and which will not.F) C) and E)
G) A) and C)

Question 4

The primary goal of inventory management is to minimize the:

Accepted Answer

A)  number of orders per year. 
B)  average inventory level.
C)  total costs of holding inventory.
D)  level of inventory for the most expensive items.
E)  total opportunity costs.F) C) and D)
G) B) and E)

Question 5

Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Accepted Answer

A)  38 carpets
B)  66 carpets
C)  47 carpets
D)  51 carpets
E)  72 carpetsF) C) and D)
G) All of the above

Question 6

The primary purpose of a cash discount is to:

Accepted Answer

A)  compensate customers for an out-of-stock item.
B)  compensate customers for faulty goods or services.
C)  offset the interest charges on an account receivable.
D)  induce customers to pay promptly.
E)  induce customers to purchase specialty items.F) B) and D)
G) B) and C)

Question 7

A firm grants credit with terms of 2/10,net 30.The firm's customers have ___ days to pay in order to receive a _____ percent discount.

Accepted Answer

A)  2; 10
B)  10; 2
C)  15; 2
D)  20; 2
E)  30; 20F) A) and E)
G) B) and D)

Question 8

A bill given to a customer for goods he or she purchased is called a(n) :

Accepted Answer

A)  account reconciliation.
B)  invoice.
C)  docket.
D)  remittance advice.
E)  shipping receiptF) C) and E)
G) A) and E) B

Question 9

A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?

Accepted Answer

A)  Zero inventory
B)  Reorder point level
C)  Safety stock level
D)  50 percent of the reorder quantity
E)  Safety stock plus the reorder quantityF) A) and D)
G) C) and D)

Question 10

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Accepted Answer

A)  Extended EOQ
B)  Just-in-time
C)  ABC approach
D)  Materials requirements planning
E)  Economic order quantityF) D) and E)
G) A) and B)

Question 11

Sweet Music sells 915 musical instruments a year at an average price per instrument of $870.All sales are credit sales with terms of 2/10,net 40.Hogan's has found that 87 percent of its customers take advantage of the discounted price.What is the amount of the firm's average accounts receivable? The discount amount is applied to a customer's account only after payments have been received and processed.Assume a 365-day year.

Accepted Answer

A)  $29,560
B)  $30,315
C)  $31,280
D)  $32,440
E)  $32,620F) B) and D)
G) A) and B)

Question 12

The set of procedures used to determine the inventory levels for demand-dependent inventories is called:

Accepted Answer

A)  the inventory flow log.
B)  materials requirements planning.
C)  a just-in-time inventory system.
D)  the kanban.
E)  the keiretsu.F) B) and D)
G) A) and E)

Question 13

A firm's float management policy is most apt to include which one of the following statements?

Accepted Answer

A)  All invoices are to be paid the same day they are received.
B)  All outgoing checks are to be delivered by the fastest means possible.
C)  The depository bank needs to process all deposits in accordance with the Check Clearing Act for the 21stCentury.
D)  Any check received is to be held until the customer's account has been updated to record the payment.
E)  Accounts payable processing should be given priority over accounts receivable processing.F) A) and E)
G) B) and E) C

Question 14

Which of the following characteristics apply to U.S.Treasury bills?
I.Interest income taxed at both the federal and state level
II.Minimal,if any,default risk
III.Marketable,but not liquid
IV.Short maturities

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and IV only
D)  II, III, and IV only
E)  I, II, III, and IVF) A) and E)
G) A) and D)

Question 15

Westover&'s has an average collection period of 31 days.Its average daily investment in accounts receivables is $51,068.What are its annual credit sales? Assume a 365-day year.

Accepted Answer

A)  $527,272
B)  $601,285
C)  $614,414
D)  $450,200
E)  $419,737F) A) and B)
G) A) and C)

Question 16

The economic order quantity (EOQ) is best defined as the:

Accepted Answer

A)  minimum size of an order needed to qualify for free shipping.
B)  minimum amount that must be ordered to obtain the quantity discount.
C)  number of items that are sold on average each month.
D)  restocking quantity that minimizes the total cost of inventory.
E)  minimal amount of inventory that must be purchased to receive a cash discount.F) B) and D)
G) C) and E)

Question 17

Which of the following characteristics will tend to cause a firm to adopt a more liberal credit policy?
I.Repeat customers
II.Excess capacity
III.High variable costs
IV.Limited competition

Accepted Answer

A)  I and II only
B)  III and IV only
C)  I, II, and III only
D)  II, III, and IV only
E)  I, II, III, and IVF) A) and D)
G) A) and E)

Question 18

Morris & Morris writes three checks a day for an average amount of $16,410 each.These checks generally clear the bank 2.5 days after they are written.In addition,the firm generally receives and deposits checks amounting to $21,618 each day.All deposits are available the next day.What is the firm's net float?

Accepted Answer

A)  Net collection float of $21,618
B)  Net collection float of $101,457
C)  Net collection float of $144,693
D)  Net disbursement float of $101,457
E)  Net disbursement float of $144,693F) A) and E)
G) A) and D) D

Question 19

Collection policy refers to the:

Accepted Answer

A)  process of determining which customers will be granted credit.
B)  process of determining the probability that customers will not pay.
C)  set of guidelines used by a firm to determine the cost of offering credit to its customers.
D)  daily process of handling cash inflows and outflows of cash.
E)  set of procedures a firm follows in collecting accounts receivable.F) B) and D)
G) B) and C)

Question 20

Which of these represents a transaction motive for holding cash?

Accepted Answer

A)  Buying extra inventory in response to an unexpected sale offered by a supplier
B)  Distributing the weekly paychecks
C)  Increasing the minimum cash balance for the firm's main bank account
D)  Unexpectedly purchasing a competitor's firm
E)  Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep risingF) A) and E)
G) C) and D)

Exam 17: Working Capital Management

Cash concentration is best defined as:

Correct Answer
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LD&M sells earnings forecasts for international securities.Its credit terms are 1/3,net 15.Based on experience,84 percent of all customers take the discount.What is the average collection period?

Correct Answer
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The terms of sale are best defined as the:

Correct Answer
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The primary goal of inventory management is to minimize the:

Correct Answer
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Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Correct Answer
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The primary purpose of a cash discount is to:

Correct Answer
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A firm grants credit with terms of 2/10,net 30.The firm's customers have _ days to pay in order to receive a ___ percent discount.

Correct Answer
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A bill given to a customer for goods he or she purchased is called a(n) :

Correct Answer
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B

A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?

Correct Answer
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Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Correct Answer
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Correct Answer
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The set of procedures used to determine the inventory levels for demand-dependent inventories is called:

Correct Answer
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A firm's float management policy is most apt to include which one of the following statements?

Correct Answer
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C

Which of the following characteristics apply to U.S.Treasury bills? I.Interest income taxed at both the federal and state level II.Minimal,if any,default risk III.Marketable,but not liquid IV.Short maturities

Correct Answer
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Westover&'s has an average collection period of 31 days.Its average daily investment in accounts receivables is $51,068.What are its annual credit sales? Assume a 365-day year.

Correct Answer
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The economic order quantity (EOQ) is best defined as the:

Correct Answer
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Which of the following characteristics will tend to cause a firm to adopt a more liberal credit policy? I.Repeat customers II.Excess capacity III.High variable costs IV.Limited competition

Correct Answer
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Correct Answer
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D

Collection policy refers to the:

Correct Answer
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Which of these represents a transaction motive for holding cash?

Correct Answer
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Exam 17: Working Capital Management

Cash concentration is best defined as:

Correct AnswerverifiedShow Answer

LD&M sells earnings forecasts for international securities.Its credit terms are 1/3,net 15.Based on experience,84 percent of all customers take the discount.What is the average collection period?

Correct AnswerverifiedShow Answer

The terms of sale are best defined as the:

Correct AnswerverifiedShow Answer

The primary goal of inventory management is to minimize the:

Correct AnswerverifiedShow Answer

Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

Correct AnswerverifiedShow Answer

The primary purpose of a cash discount is to:

Correct AnswerverifiedShow Answer

A firm grants credit with terms of 2/10,net 30.The firm's customers have ___ days to pay in order to receive a _____ percent discount.

Correct AnswerverifiedShow Answer

A bill given to a customer for goods he or she purchased is called a(n) :

Correct AnswerverifiedB

A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?

Correct AnswerverifiedShow Answer

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The set of procedures used to determine the inventory levels for demand-dependent inventories is called:

Correct AnswerverifiedShow Answer

A firm's float management policy is most apt to include which one of the following statements?

Correct AnswerverifiedC

Which of the following characteristics apply to U.S.Treasury bills? I.Interest income taxed at both the federal and state level II.Minimal,if any,default risk III.Marketable,but not liquid IV.Short maturities

Correct AnswerverifiedShow Answer

Westover&'s has an average collection period of 31 days.Its average daily investment in accounts receivables is $51,068.What are its annual credit sales? Assume a 365-day year.

Correct AnswerverifiedShow Answer

The economic order quantity (EOQ) is best defined as the:

Correct AnswerverifiedShow Answer

Which of the following characteristics will tend to cause a firm to adopt a more liberal credit policy? I.Repeat customers II.Excess capacity III.High variable costs IV.Limited competition

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

Collection policy refers to the:

Correct AnswerverifiedShow Answer

Which of these represents a transaction motive for holding cash?

Correct AnswerverifiedShow Answer

Correct Answer
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A firm grants credit with terms of 2/10,net 30.The firm's customers have _ days to pay in order to receive a ___ percent discount.

Correct Answer
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B

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C

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D

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