Question 1

Cash concentration accounts:

Accepted Answer

A)  are no longer needed since the Check Clearing Act for the 21st Century has been passed.
B)  eliminate the need for lockboxes.
C)  decrease a firm's disbursement float by reducing mail and processing delays.
D)  allow firms to more efficiently handle cash.
E)  tend to decrease a firm's investment income.F) C) and E)
G) D) and E)

Question 2

Laurie's Ice Rink keeps an extra $1,000 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?

Accepted Answer

A)  Speculative
B)  Float requirement
C)  Transaction
D)  Precautionary
E)  AvailabilityF) C) and D)
G) B) and D)

Question 3

On May 12,you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10,net 20.The discounted amount due is _____ which is payable no later than ____.May has 31 days.

Accepted Answer

A)  $2,960; June 1
B)  $3,515; June 1
C)  $5,580; May 22
D)  $6,076; May 22
E)  $5,960; May 22F) C) and D)
G) B) and C)

Question 4

Kate's Korner Market monitors 3 percent of its inventory on a daily basis,another 20 percent on a weekly basis,and the remaining inventory on a quarterly basis.What inventory management approach is being used?

Accepted Answer

A)  ABC
B)  EOQ
C)  MRP
D)  Q*
E)  JITF) B) and E)
G) All of the above

Question 5

How are checks that are deposited into a typical lockbox handled?

Accepted Answer

A)  The checks are deposited into a local bank which then overnights one check for the entire amount to the firm.
B)  The checks are collected once a day, normally in the early morning, by a bank employee.
C)  The checks are posted to the customer's account prior to being deposited.
D)  The checks are collected throughout the day and immediately deposited into the firm's account.
E)  The checks are collected and sent overnight to the firm's main office for processing.F) A) and B)
G) B) and E)

Question 6

Which of these is a shortage cost?

Accepted Answer

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

Question 7

You have $32,618 on deposit at the bank with no outstanding checks or deposits.If you write a check for $8,900,what will be your book balance on that day if the check will take 3 days to clear?

Accepted Answer

A)  $23,718
B)  $29,651
C)  $41,518
D)  $30,022
E)  $32,618F) None of the above
G) D) and E)

Question 8

You purchased an item costing $6,379 on April 5.The terms of sale were 1/7,net 15.What is the last day you can pay the discounted price?

Accepted Answer

A)  April 12
B)  April 22
C)  April 28
D)  April 6
E)  April 11F) A) and B)
G) A) and C)

Question 9

The optimal credit policy of any firm will:

Accepted Answer

A)  maximize sales.
B)  minimize bad debts.
C)  maximize units sold.
D)  minimize the total costs of granting credit.
E)  minimize carrying costs.F) A) and C)
G) C) and D)

Question 10

Which statement is correct?

Accepted Answer

A)  Firms cannot use lockboxes if they use cash concentration accounts.
B)  Firms prefer to increase processing delay on disbursements.
C)  Firms prefer to eliminate all types of float.
D)  Firms open regional offices so their employees can pick up lockbox payments throughout the day.
E)  The Check Clearing Act for the 21stCentury is designed to reduce total collection time to one day.F) C) and E)
G) A) and B)

Question 11

You place an order for 380 units of Good Y at a unit price of $49.The supplier offers terms of 2/10,net 30.The supplier is offering you a discount of _____ on your order if you pay within ____ days.

Accepted Answer

A)  $372.40;10
B)  $1,489.60;30
C)  $372.40;20
D)  $1,489.60;10
E)  $372.40; 30F) A) and E)
G) D) and E)

Question 12

Holding cash simply as a financial reserve is referred to as the ____ motive.

Accepted Answer

A)  precautionary
B)  opportunistic
C)  speculative
D)  activity
E)  transactionF) All of the above
G) B) and E)

Question 13

Beauty Aids has an average collection period of 8.4 days and annual credit sales of $937,800.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.

Accepted Answer

A)  $18,850
B)  $20,375
C)  $22,506
D)  $18,906
E)  $21,582F) B) and E)
G) C) and E)

Question 14

Which of these is most likely the fastest method of collecting cash?

Accepted Answer

A)  Requiring customers to submit all payments to a lockbox
B)  Requiring customers to submit all payments to the home office
C)  Initiating a financial electronic data interchange at the time of sale
D)  Offering customers credit terms of 1/5, net 15
E)  Eliminating all disbursement floatF) A) and B)
G) B) and E)

Question 15

Which one of the following is a primary benefit of implementing zero-balance accounts into a cash management system?

Accepted Answer

A)  Increased disbursements float
B)  Total elimination of all safety stocks
C)  Additional cash availability
D)  Decreased collection float
E)  Elimination of all floatF) C) and D)
G) B) and E)

Question 16

Which statement is correct?

Accepted Answer

A)  Commercial paper is highly marketable.
B)  All T-bills are issued with 90-day maturities.
C)  A certificate of deposit is a short-term loan to the government.
D)  Any CD with a face amount of $10,000 or more is classified as a jumbo CD.
E)  Money market preferred securities have less price volatility than ordinary preferred.F) B) and D)
G) A) and B)

Question 17

Which one of the following is a disbursement account into which funds are transferred from a master account only as the funds are needed to cover checks presented for payment?

Accepted Answer

A)  Lockbox account
B)  Cash concentration account
C)  Ledger account
D)  Zero-balance account
E)  Cash clearing accountF) A) and D)
G) B) and D)

Question 18

As of this morning,a firm had a ledger balance of $684 with no outstanding deposits or checks.Today,the firm deposited six checks in the amount of $49 each and wrote a check in the amount of $283.What is the amount of the collection float as of the end of the day assuming none of these checks had cleared?

Accepted Answer

A)  $11
B)  $474
C)  $283
D)  $294
E)  $978F) All of the above
G) D) and E)

Question 19

Float is defined as the difference between the:

Accepted Answer

A)  beginning and ending cash balances as shown on a cash budget.
B)  ledger balance and the available balance.
C)  book balance and the ledger balance.
D)  collections and disbursements for any given period of time.
E)  available balance and the collected balance.F) A) and E)
G) A) and C)

Question 20

AJ's Market generally holds $50,000 in cash in case an unexpected investment opportunity arises.This is an example of the ____ motive for holding cash.

Accepted Answer

A)  precautionary
B)  opportunistic
C)  speculative
D)  reserve
E)  transactionF) C) and E)
G) A) and E)

Exam 17: Working Capital Management

AJ's Market generally holds $50,000 in cash in case an unexpected investment opportunity arises.This is an example of the ____ motive for holding cash.

Correct Answer
verified

Holding cash simply as a financial reserve is referred to as the ____ motive.

Correct Answer
verified

Beauty Aids has an average collection period of 8.4 days and annual credit sales of $937,800.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.

Correct Answer
verified

Which of these is most likely the fastest method of collecting cash?

Correct Answer
verified

Which statement is correct?

Correct Answer
verified

Laurie's Ice Rink keeps an extra $1,000 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?

Correct Answer
verified

Which of these is a shortage cost?

Correct Answer
verified

You purchased an item costing $6,379 on April 5.The terms of sale were 1/7,net 15.What is the last day you can pay the discounted price?

Correct Answer
verified

The optimal credit policy of any firm will:

Correct Answer
verified

Correct Answer
verified

Kate's Korner Market monitors 3 percent of its inventory on a daily basis,another 20 percent on a weekly basis,and the remaining inventory on a quarterly basis.What inventory management approach is being used?

Correct Answer
verified

Which one of the following is a disbursement account into which funds are transferred from a master account only as the funds are needed to cover checks presented for payment?

Correct Answer
verified

Float is defined as the difference between the:

Correct Answer
verified

You have $32,618 on deposit at the bank with no outstanding checks or deposits.If you write a check for $8,900,what will be your book balance on that day if the check will take 3 days to clear?

Correct Answer
verified

Cash concentration accounts:

Correct Answer
verified

You place an order for 380 units of Good Y at a unit price of $49.The supplier offers terms of 2/10,net 30.The supplier is offering you a discount of _ on your order if you pay within days.

Correct Answer
verified

How are checks that are deposited into a typical lockbox handled?

Correct Answer
verified

On May 12,you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10,net 20.The discounted amount due is _ which is payable no later than .May has 31 days.

Correct Answer
verified

Which one of the following is a primary benefit of implementing zero-balance accounts into a cash management system?

Correct Answer
verified

Which statement is correct?

Correct Answer
verified

Exam 17: Working Capital Management

AJ's Market generally holds $50,000 in cash in case an unexpected investment opportunity arises.This is an example of the ____ motive for holding cash.

Correct AnswerverifiedShow Answer

Holding cash simply as a financial reserve is referred to as the ____ motive.

Correct AnswerverifiedShow Answer

Beauty Aids has an average collection period of 8.4 days and annual credit sales of $937,800.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.

Correct AnswerverifiedShow Answer

Which of these is most likely the fastest method of collecting cash?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Laurie's Ice Rink keeps an extra $1,000 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?

Correct AnswerverifiedShow Answer

Which of these is a shortage cost?

Correct AnswerverifiedShow Answer

You purchased an item costing $6,379 on April 5.The terms of sale were 1/7,net 15.What is the last day you can pay the discounted price?

Correct AnswerverifiedShow Answer

The optimal credit policy of any firm will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Kate's Korner Market monitors 3 percent of its inventory on a daily basis,another 20 percent on a weekly basis,and the remaining inventory on a quarterly basis.What inventory management approach is being used?

Correct AnswerverifiedShow Answer

Which one of the following is a disbursement account into which funds are transferred from a master account only as the funds are needed to cover checks presented for payment?

Correct AnswerverifiedShow Answer

Float is defined as the difference between the:

Correct AnswerverifiedShow Answer

You have $32,618 on deposit at the bank with no outstanding checks or deposits.If you write a check for $8,900,what will be your book balance on that day if the check will take 3 days to clear?

Correct AnswerverifiedShow Answer

Cash concentration accounts:

Correct AnswerverifiedShow Answer

You place an order for 380 units of Good Y at a unit price of $49.The supplier offers terms of 2/10,net 30.The supplier is offering you a discount of _____ on your order if you pay within ____ days.

Correct AnswerverifiedShow Answer

How are checks that are deposited into a typical lockbox handled?

Correct AnswerverifiedShow Answer

On May 12,you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10,net 20.The discounted amount due is _____ which is payable no later than ____.May has 31 days.

Correct AnswerverifiedShow Answer

Which one of the following is a primary benefit of implementing zero-balance accounts into a cash management system?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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You place an order for 380 units of Good Y at a unit price of $49.The supplier offers terms of 2/10,net 30.The supplier is offering you a discount of _ on your order if you pay within days.

Correct Answer
verified

Correct Answer
verified

On May 12,you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10,net 20.The discounted amount due is _ which is payable no later than .May has 31 days.

Correct Answer
verified

Correct Answer
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Correct Answer
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