MATS Lesson 10 (Lesson 9 recap)

A-Z Taxis needs a new taxi to meet an increase in business. The business is profitable but the owner, Ken Molina, doesn't want to use current monies to fund the purchase. Which one of the following funding methods would you suggest he considers?

• Cash purchase

• Purchase on 30 days' credit terms

• Bank overdraft

• Hire purchase

A hire purchase agreement is:

• medium-term agreement where a finance company funds an asset and the business makes instalment payments to pay the cost plus interest

• short-term agreement to fund an asset on 30 days' commercial credit terms

• medium-term agreement under which a bank or finance company lends the funds to a business to enable it to buy the asset

• type of bank overdraft

Complete the following sentence: The financing method whereby a business trades in an old asset to meet part of the payment for a new asset is known as _______.

A school needs a new photocopier for the school office. Who is the appropriate person to give authority for this capital expenditure?

• the school secretary

• the head teacher

• the school caretaker

• year 11 students

Noah's startup is evaluating its financial efficiency. Which one of the following correctly describes the working capital cycle for Noah's business?

• inventory days + receivable days – payable days

• inventory days + payable days – receivable days

• payable days + receivable days – inventory days

• payable days + receivable days + inventory days

Imagine Ella's Boutique reduces the credit terms offered to customers from 30 days to 20 days. What effect would this have on the cash flow of Ella's Boutique in the short term?

• Improve

• Worsen

Imagine Poppy's boutique increases the inventory holding period from 25 days to 40 days. What effect would this have on the cash flow of the boutique in the short term?

• Improve

• Worsen

Imagine a retail company where Daniel, Anaya, and Benjamin are managing directors. What effect would doubling the credit limits of all existing customers have on the company's cash flow in the short term?

• Improve

• Worsen

Imagine Sophie's Cafe negotiates with its coffee bean suppliers to increase credit terms from 35 days to 45 days. What effect would this have on the cash flow of the cafe in the short term?

• Improve

• Worsen

Mira's boutique is considering changing its customer credit terms from 30 days net to offering a 2.5% prompt payment discount if paid within 14 days, or 30 days net otherwise. What effect would this have on the cash flow of the boutique in the short term?

• Improve

• Worsen