Which one of the following increases cash?

accepting credit from a supplier

making a payment on a bank loan

Which one of the following will increase net working capital? Assume the current ratio is greater than 1.0.

selling inventory at a profit on credit

paying a supplier for a previous purchase

Which one of the following will decrease the net working capital of a firm? Assume the current ratio is greater than 1.0.

paying a payment on a long-term debt

collecting payment from a customer

selling a fixed asset for book value

paying a supplier for the purchase of an inventory item

Which of the following will increase the operating cycle?

II. increasing the payables period

III. decreasing the receivable turnover rate

I. increasing the inventory turnover rate

Which one of the following equals the operating cycle?

inventory period plus the accounts receivable period

cash cycle plus accounts receivable period

inventory period plus the accounts payable period

accounts payable period minus the cash cycle

accounts payable period plus the accounts receivable period

Which one of the following will decrease the operating cycle?

decreasing the accounts payable period

decreasing the inventory turnover rate

increasing the accounts receivable turnover rate

increasing the accounts payable period

increasing the accounts receivable period

The operating cycle describes how a product:

moves through the current asset accounts.

moves through the production process.

Metal Designs, Inc., historically produced products for inventory. Now, the firm only produces a product when it receives an actual order from a customer. All else equal, this change will:

lengthen the accounts receivable period.

shorten the accounts payable period.

decrease the inventory turnover rate.

Which of the following statements is (are) correct?

I. An increase in the accounts payable period shortens the cash cycle.

II. The cash cycle is equal to the operating cycle minus the inventory period.

III. A negative cash cycle is preferable to a positive cash cycle.

IV. The cash cycle plus the accounts receivable period is equal to the operating cycle.

Which one of the following statements is correct concerning the cash cycle?

The longer the cash cycle, the more likely a firm will need external financing.

Increasing the accounts payable period increases the cash cycle.

A positive cash cycle is preferable to a negative cash cycle.

The cash cycle can exceed the operating cycle if the payables period is equal to zero.

Offering early payment discounts to customers will tend to increase the cash cycle.

Which one of the following actions will tend to increase the accounts receivable period? Assume the accounts receivable period is currently 34 days.

eliminating the discount for early payment by credit customers

tightening the standards for granting credit to customers

refusing to grant additional credit to any customer who pays late

increasing the finance charges applied to all customer balances outstanding over thirty days

granting discounts for cash sales

An increase in which one of the following is an indicator that an accounts receivable policy is becoming more restrictive?

accounts receivable turnover rate

If you pay your suppliers five days sooner, then:

your payables turnover rate will decrease.

you may require additional funds from other sources to fund the cash cycle.

your operating cycle will increase.

the accounts receivable period will decrease.

Which one of the following will increase the accounts payable period, all else constant?

an increase in the ending accounts payable balance

an increase in the cost of goods sold account value

a decrease in the operating cycle

an increase in the accounts payable turnover rate

A firm with a flexible short-term financial policy will:

maintain a low balance in accounts receivables.

only have minimal amounts, if any, invested in marketable securities.

have tight restrictions on granting credit to customers.

Which one of the following is indicative of a short-term restrictive financial policy?

purchasing inventory on an as-needed basis

granting credit to all customers

investing heavily in marketable securities

maintaining a large accounts receivable balance

A flexible short-term financial policy:

is most appropriate for a firm with relatively high carrying costs and relatively low shortage costs.

increases a firm's need for long-term financing.

avoids bad debts by only selling items for cash.

maximizes fixed assets and minimizes current assets.

The optimal investment in current assets for an operating firm occurs at the point where:

the total costs of holding current assets is minimized.

both shortage costs and carrying costs equal zero.

shortage costs are equal to zero.

carrying costs are equal to zero.

carrying costs exceed shortage costs.

Which one of the following statements is correct?

B. A firm with a flexible financing policy frequently invests in marketable securities.

A. A firm with a restrictive financing policy secures sufficient long-term financing to fund all its assets.

C. A firm with a flexible financing policy tends to use short-term financing on a frequent basis.

D. Firms tend to avoid short-term financing under both restrictive and flexible financing policies.

E. Firms with seasonal sales select flexible financing policies.

Which one of the following statements is correct?

Long-term interest rates tend to be less volatile than short-term rates.

Seasonal needs are financed externally when firms adhere to a flexible financing policy.

A flexible financing policy tends to increase the risk of encountering financial distress.

Most firms tend to finance inventory with long-term debt.

Short-term interest rates are generally higher than long-term rates.

Assume each month has 30 days and a firm has a 60-day accounts receivable period. During the second calendar quarter of the year, that firm will collect payment for the sales it made during which of the following months?

October, November, and December

November, December, and January

December, January, and February

A manufacturing firm has a 90-day collection period. The firm produces seasonal merchandise and thus has the least sales during the first quarter of a year and the highest level of sales during the fourth quarter of a year. The firm maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters. The firm is most apt to face a cash-out situation in:

any quarter with equal probabilities of occurrence.

Jill is the CFO of Summertime Adventures which is a seasonal firm specializing in products related to water sports. The firm purchases inventory one month before it is sold and pays for its purchases 60 days after the invoice date. Sales are highest during July and August. Currently, Jill is preparing the cash disbursements section of the firm's cash budget. Which one of the following statements is supported by this information?

Payments to suppliers will be highest during the months of August and September.

Inventory purchases will be highest during the months of July and August.

Inventory purchases will be highest during the months of May and June.

Payments to suppliers will be highest during the months of June and July.

Payments to suppliers will be highest during the months of July and August.

Which one of the following statements is correct concerning the cash balance of a firm?

A cumulative cash deficit indicates a borrowing need.

Most firms attempt to maintain a zero cash balance at all times.

The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum desired cash balance.

On a cash balance report, the cumulative cash surplus at the end of May is used as June's beginning cash balance.

The ending cash balance must equal the minimum desired cash balance.

Chapter 18 (Ross12e) THỨ 1

Authored by Bich Nguyen

Financial Education

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:

operating cycle.

inventory period.

accounts receivable period.

accounts payable period.

cash cycle.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The length of time that elapses between the day a firm purchases an inventory item and the day that item sells is called the:

operating cycle.

inventory period.

accounts receivable period.

accounts payable period.

cash cycle.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The length of time between the sale of inventory and the collection of the payment for that sale is called the:

operating cycle.

inventory period.

accounts receivable period.

accounts payable period.

cash cycle.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The length of time between the day a firm purchases an item from its supplier until the day that supplier is paid for that purchase is called the:

operating cycle.

inventory period.

accounts receivable period.

accounts payable period.

cash cycle.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Central Supply purchased a toboggan for inventory this morning and paid cash for it. The time period between today and the day Central Supply will receive cash from the sale of this toboggan is called the:

operating cycle.

inventory period.

accounts receivable period.

accounts payable period.

cash cycle.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A graphical representation of the operating and cash cycles is called a(n):

operating chart.

cash flow time line.

production flow line.

component chart.

working time line.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Costs that increase as a firm acquires additional current assets are called ____ costs.

carrying

shortage

order

safety

trading

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Chapter 18 (Ross12e) THỨ 1

The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:

The length of time that elapses between the day a firm purchases an inventory item and the day that item sells is called the:

The length of time between the sale of inventory and the collection of the payment for that sale is called the:

The length of time between the day a firm purchases an item from its supplier until the day that supplier is paid for that purchase is called the:

Central Supply purchased a toboggan for inventory this morning and paid cash for it. The time period between today and the day Central Supply will receive cash from the sale of this toboggan is called the:

A graphical representation of the operating and cash cycles is called a(n):

Costs that increase as a firm acquires additional current assets are called ____ costs.

Costs that decrease as a firm acquires additional current assets are called ____ costs.

Steve has estimated the cash inflows and outflows for his hardware store for next year. The report that he has prepared recapping these cash flows is called a:

Taylor Supply has made an agreement with its bank that it can borrow up to $10,000 at any time over the next year. This arrangement is called a(n):

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