Question 1

Taylor's Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Accepted Answer

A)   Collection float increased
B)   Collection float decreased
C)   Disbursement float increased
D)   Disbursement float decreased
E)   Net float remained unchangedF) All of the above
G) A) and B)

Question 2

What are some of the pros and cons of a JIT inventory management system?

Accepted Answer

Pros: reduced investment in inventory, l...

Question 3

Which one of the following 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) C) and E)
G) A) and C)

Question 4

You purchased an item costing $5,700 on July 13. The terms of sale were 1/5, net 20. What is the last day you can pay the discounted price?

Accepted Answer

A)   July 18
B)   July 20
C)   July 28
D)   August 2
E)   August 5F) B) and E)
G) A) and D)

Question 5

You have $168,000 on deposit with no outstanding checks or uncleared deposits. One day you write a check for $21,000. What is your book balance?

Accepted Answer

A)   $147,000
B)   $158,500
C)   $168,000
D)   $178,500
E)   $189,000F) B) and C)
G) A) and D)

Question 6

Which one of the following would tend to create an unexpected increase in a firm's average collection period?

Accepted Answer

A)   Increased credit sales
B)   The implementation of a cash discount
C)   Increased customer delinquencies
D)   Increased dollar value per each sale
E)   Increased collection effortsF) A) and B)
G) B) and D)

Question 7

Which one of the following is a shortage cost associated with a firm's inventory?

Accepted Answer

A)   Restocking cost
B)   Opportunity cost of capital
C)   Inventory obsolescence
D)   Insurance cost
E)   Inventory theftF) D) and E)
G) C) and D)

Question 8

Which one of the following characteristics generally applies to commercial paper?

Accepted Answer

A)   Issued only by financial institutions
B)   Issued only by corporations
C)   Maturities limited to 90 days or less
D)   Unsecured
E)   Secured by accounts receivableF) C) and D)
G) None of the above

Question 9

Ted's Toys just reconciled its bank account and has $12,300 in outstanding deposits and $31,400 in checks outstanding. The firm's checkbook has a positive balance. The firm sells on a cash basis only and deposits its receipts on a daily basis. The deposited funds are available to the firm the following day. The firm writes and mails checks on a daily basis also. These checks generally clear the bank in 3 days. What do you know about the firm's float given this information?

Accepted Answer

A)   The firm has disbursements float but no collection float.
B)   The collection float exceeds the disbursement float.
C)   The firm has a net collection float.
D)   The disbursement float exceeds the collection float.
E)   Since transactions occur daily, the firm has no float.F) A) and B)
G) C) and D)

Question 10

Al's Bakery has a check book 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. 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) A) and E)
G) A) and D)

Question 11

On any given day, a firm receives numerous checks worth an average combined total of $5,900. The funds from the deposited checks are generally available after 1.5 days. Every day, the firm mails out checks totaling $4,400 that generally take 3 days to clear the bank. What is the amount of the collection float?

Accepted Answer

A)   $4,400
B)   $4,450
C)   $8,850
D)   $13,250
E)   $13,400F) D) and E)
G) None of the above

Question 12

Stan Lee's sells 4,300 carpets a year at an average price per carpet of $1,490. The carrying cost per unit is $21.63. The company orders 500 carpets at a time and has a fixed order cost of $69 per order. The carpets are sold out before they are restocked. What is the economic order quantity?

Accepted Answer

A)   147 carpets
B)   166 carpets
C)   184 carpets
D)   315 carpets
E)   348 carpetsF) A) and B)
G) A) and D)

Question 13

On any given day, Casey's receives numerous checks worth an average combined total of $6,300. The funds from the deposited checks are generally available in 1.5 days. Every day, the firm mails out checks totaling $4,800 that generally take 2 days to clear the bank. What is the amount of the disbursement float?

Accepted Answer

A)   $150
B)   $400
C)   $9,450
D)   $9,600
E)   $9,850F) B) and D)
G) B) and C)

Question 14

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

Accepted Answer

A)   I day
B)   5 days
C)   20 days
D)   25 days
E)   30 daysF) None of the above
G) B) and C)

Question 15

Which one of the following 5 Cs refers to the general economic climate in a customer's line of business?

Accepted Answer

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

Question 16

The transaction motive for holding cash refers to the need to have cash for which one of the following purposes?

Accepted Answer

A)   Safety margin
B)   Investment opportunities
C)   Daily operations
D)   Financial reserve
E)   Bargain opportunitiesF) All of the above
G) C) and D)

Question 17

When are funds generally transferred into zero-balance accounts?

Accepted Answer

A)   Monthly
B)   Weekly
C)   Daily
D)   As needed
E)   NeverF) D) and E)
G) A) and E)

Question 18

Lockboxes should be located:

Accepted Answer

A)   in every town where a firm has a customer.
B)   based on where a firm's primary customers are located.
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) A) and D)
G) B) and D)

Question 19

The Boat House offers credit terms of 2/15, net 45 to all of its customers. Historically, 86 percent of its customers take advantage of the discount. What is the firm's average collection period?

Accepted Answer

A)   17.36 days
B)   18.87 days
C)   19.20 days
D)   20.33 days
E)   21.08 daysF) A) and B)
G) B) and D)

Question 20

Which one of the following best defines the term 'credit scoring'?

Accepted Answer

A)   Categorizing customers into groups depending upon the length of time it takes each customer to pay for purchases
B)   Compiling a list of accounts receivables segregated by the length of time each receivable has been outstanding
C)   Evaluating 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 timeF) A) and E)
G) B) and E)

Exam 17: Working Capital Management

What are some of the pros and cons of a JIT inventory management system?

Correct Answer
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Pros: reduced investment in inventory, l...
View Answer

The Boat House offers credit terms of 2/15, net 45 to all of its customers. Historically, 86 percent of its customers take advantage of the discount. What is the firm's average collection period?

Correct Answer
verified

Which one of the following 5 Cs refers to the general economic climate in a customer's line of business?

Correct Answer
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Correct Answer
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When are funds generally transferred into zero-balance accounts?

Correct Answer
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Correct Answer
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Al's Bakery has a check book 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. There are no other outstanding items. Which one of the following statements accurately reflects this situation?

Correct Answer
verified

Correct Answer
verified

Lockboxes should be located:

Correct Answer
verified

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

Correct Answer
verified

Stan Lee's sells 4,300 carpets a year at an average price per carpet of $1,490. The carrying cost per unit is $21.63. The company orders 500 carpets at a time and has a fixed order cost of $69 per order. The carpets are sold out before they are restocked. What is the economic order quantity?

Correct Answer
verified

Which one of the following would tend to create an unexpected increase in a firm's average collection period?

Correct Answer
verified

You purchased an item costing $5,700 on July 13. The terms of sale were 1/5, net 20. What is the last day you can pay the discounted price?

Correct Answer
verified

Which one of the following best defines the term 'credit scoring'?

Correct Answer
verified

You have $168,000 on deposit with no outstanding checks or uncleared deposits. One day you write a check for $21,000. What is your book balance?

Correct Answer
verified

Which one of the following characteristics generally applies to commercial paper?

Correct Answer
verified

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

Correct Answer
verified

The transaction motive for holding cash refers to the need to have cash for which one of the following purposes?

Correct Answer
verified

Which one of the following is a shortage cost associated with a firm's inventory?

Correct Answer
verified

Taylor's Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Correct Answer
verified

Exam 17: Working Capital Management

What are some of the pros and cons of a JIT inventory management system?

Correct AnswerverifiedPros: reduced investment in inventory, l...View AnswerShow Answer

The Boat House offers credit terms of 2/15, net 45 to all of its customers. Historically, 86 percent of its customers take advantage of the discount. What is the firm's average collection period?

Correct AnswerverifiedShow Answer

Which one of the following 5 Cs refers to the general economic climate in a customer's line of business?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When are funds generally transferred into zero-balance accounts?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Al's Bakery has a check book 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. There are no other outstanding items. Which one of the following statements accurately reflects this situation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Lockboxes should be located:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Stan Lee's sells 4,300 carpets a year at an average price per carpet of $1,490. The carrying cost per unit is $21.63. The company orders 500 carpets at a time and has a fixed order cost of $69 per order. The carpets are sold out before they are restocked. What is the economic order quantity?

Correct AnswerverifiedShow Answer

Which one of the following would tend to create an unexpected increase in a firm's average collection period?

Correct AnswerverifiedShow Answer

You purchased an item costing $5,700 on July 13. The terms of sale were 1/5, net 20. What is the last day you can pay the discounted price?

Correct AnswerverifiedShow Answer

Which one of the following best defines the term 'credit scoring'?

Correct AnswerverifiedShow Answer

You have $168,000 on deposit with no outstanding checks or uncleared deposits. One day you write a check for $21,000. What is your book balance?

Correct AnswerverifiedShow Answer

Which one of the following characteristics generally applies to commercial paper?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The transaction motive for holding cash refers to the need to have cash for which one of the following purposes?

Correct AnswerverifiedShow Answer

Which one of the following is a shortage cost associated with a firm's inventory?

Correct AnswerverifiedShow Answer

Taylor's Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Correct AnswerverifiedShow Answer

Correct Answer
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Pros: reduced investment in inventory, l...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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