Question 1

Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?

Accepted Answer

A)  economic credit function
B)  credit analysis
C)  credit cost curve
D)  accounts receivables aging
E)  optimal credit curveF) All of the above
G) A) and D)

Question 2

Which one of the following defines the terms of sale?

Accepted Answer

A)  legal documents related to the credit sale of either goods or services
B)  period of time during which a discount can be taken on an invoice
C)  period of time granted to a customer to pay for the goods or services received
D)  conditions under which a firm sells its goods or services for either cash or credit
E)  process used to determine which customers shall be granted credit and which shall notF) C) and D)
G) A) and E)

Question 3

Stan Lee's sells 4300 carpets a year at an average price per carpet of $1490.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)  315 carpets
B)  348 carpets
C)  166 carpets
D)  184 carpets
E)  147 carpetsF) C) and D)
G) B) and E)

Question 4

Which one of the following best illustrates the concept of derived demand?

Accepted Answer

A)  Retail stores have higher sales around the holiday season than in other seasons of the year.
B)  Restaurant sales are rising because unemployment is falling.
C)  A windscreen company has to step up production because motor vehicle sales are increasing.
D)  A grocery store is selling more fresh fruits and vegetables because people are improving their diets.
E)  A minimum wage worker tends to buy more home-brand products than do more highly-paid professionals.F) A) and B)
G) C) and D)

Question 5

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

Accepted Answer

A)  ABC
B)  MRP
C)  JIT
D)  Q*
E)  EOQF) B) and D)
G) None of the above

Question 6

On May 11,you purchased $3700 of merchandise from a supplier.The terms of the sale were 1/5,net 15.The discounted amount due is _____ which is payable no later than _____.

Accepted Answer

A)  $2960;May 16
B)  $3663;May 26
C)  $3515;May 16
D)  $3663;May 16
E)  $3515;May 26F) B) and D)
G) A) and B)

Question 7

Which one of the following is the set of procedures used to determine the inventory levels for demand-dependent inventory?

Accepted Answer

A)  keiretsu
B)  kanban
C)  inventory flow log
D)  material requirement planning
E)  just-in-time inventory systemF) B) and E)
G) B) and D)

Question 8

Which one of the following is the need to hold cash simply as a financial reserve?

Accepted Answer

A)  activity motive
B)  speculative motive
C)  precautionary motive
D)  opportunistic motive
E)  transaction motiveF) B) and E)
G) B) and C)

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)  safety stock plus the reorder quantity
B)  50 per cent of the reorder quantity
C)  zero inventory
D)  safety stock level
E)  reorder point levelF) A) and E)
G) C) and D)

Question 10

The optimal credit policy will do which one of the following?

Accepted Answer

A)  maximise sales
B)  minimise the total costs of granting credit
C)  minimise carrying costs
D)  minimise bad debts
E)  maximise units soldF) A) and D)
G) C) and D)

Question 11

A firm grants trade credit with terms of 3/20,n/60 .It signifies,that if payment has not been made within ____ days,then the full invoice price is payable within _____ days.

Accepted Answer

A)  20;60
B)  3;20
C)  3;60
D)  20;23
E)  20;40F) A) and B)
G) C) and E)

Question 12

Which one of the following best defines the economic order quantity (EOQ) ?

Accepted Answer

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

Question 13

Which one of the following is a system for managing demand-dependent inventories that minimises the amount of inventory on hand?

Accepted Answer

A)  kanban
B)  keiretsu
C)  just-in-time inventory system
D)  material requirement planning
E)  inventory flow logF) B) and C)
G) D) and E)

Question 14

Which one of the following best states the primary goal of inventory management?

Accepted Answer

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

Question 15

Which of the following are considered as money market securities in Australia?
I.bank-accepted bills
II.commercial bills
III.10 year government bonds
IV.treasury notes
V.a bank term loan

Accepted Answer

A)  all of them
B)  I,II and IV only
C)  IV and V only
D)  IV,V and VI only
E)  I,II and V onlyF) A) and C)
G) C) and D)

Question 16

Which one of the following is evidence of indebtedness?

Accepted Answer

A)  concentration policy
B)  credit policy
C)  credit instrument
D)  credit cost curve
E)  terms of saleF) A) and B)
G) None of the above

Question 17

Which one of the following best represents the transaction motive for holding cash?

Accepted Answer

A)  unexpectedly purchasing a competitor's firm
B)  paying weekly wages and salaries
C)  buying extra inventory in response to an unexpected sale offered by a supplier
D)  increasing the minimum cash balance for the firm's main bank account
E)  holding cash in anticipation that the firm may need to close for a few days if floodwaters keep risingF) None of the above
G) A) and B)

Question 18

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

Accepted Answer

A)  amount of inventory that is sold during the time period it takes a vendor to restock an item
B)  least amount of inventory which a firm can purchase at any one time
C)  minimal amount of inventory which must be purchased in order to qualify for a cash discount
D)  restocking quantity that minimises the total cost of inventory
E)  amount of inventory that is required on a monthly basisF) All of the above
G) A) and B)

Question 19

On June 22,Bondi Beachwear purchased $3300 worth of goods.The terms of the sale were 1/7,net 21.What is the effective annual rate of interest for the credit period for this sale?

Accepted Answer

A)  34.42 per cent
B)  38.63 per cent
C)  31.38 per cent
D)  29.96 per cent
E)  37.73 per centF) B) and E)
G) B) and D)

Question 20

Baxter's,Inc.generally holds $125 000 in cash in case an unexpected investment opportunity arises.Which one of the following refers to holding cash for this type of purpose?

Accepted Answer

A)  transaction motive
B)  reserve motive
C)  opportunistic motive
D)  speculative motive
E)  precautionary motiveF) D) and E)
G) B) and C)

Exam 17: Working Capital Management

Which of the following are considered as money market securities in Australia? I.bank-accepted bills II.commercial bills III.10 year government bonds IV.treasury notes V.a bank term loan

Correct AnswerverifiedShow Answer

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 is the need to hold cash simply as a financial reserve?

Correct AnswerverifiedShow Answer

On June 22,Bondi Beachwear purchased $3300 worth of goods.The terms of the sale were 1/7,net 21.What is the effective annual rate of interest for the credit period for this sale?

Correct AnswerverifiedShow Answer

A firm grants trade credit with terms of 3/20,n/60 .It signifies,that if payment has not been made within ____ days,then the full invoice price is payable within _____ days.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Baxter's,Inc.generally holds $125 000 in cash in case an unexpected investment opportunity arises.Which one of the following refers to holding cash for this type of purpose?

Correct AnswerverifiedShow Answer

Which one of the following is a system for managing demand-dependent inventories that minimises the amount of inventory on hand?

Correct AnswerverifiedShow Answer

Which one of the following defines the terms of sale?

Correct AnswerverifiedShow Answer

The optimal credit policy will do which one of the following?

Correct AnswerverifiedShow Answer

Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?

Correct AnswerverifiedShow Answer

Which one of the following best illustrates the concept of derived demand?

Correct AnswerverifiedShow Answer

Which one of the following is the set of procedures used to determine the inventory levels for demand-dependent inventory?

Correct AnswerverifiedShow Answer

On May 11,you purchased $3700 of merchandise from a supplier.The terms of the sale were 1/5,net 15.The discounted amount due is _____ which is payable no later than _____.

Correct AnswerverifiedShow Answer

Which one of the following is evidence of indebtedness?

Correct AnswerverifiedShow Answer

Stan Lee's sells 4300 carpets a year at an average price per carpet of $1490.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 best states the primary goal of inventory management?

Correct AnswerverifiedShow Answer

Which one of the following best represents the transaction motive for holding cash?

Correct AnswerverifiedShow Answer

Which one of the following best defines the economic order quantity (EOQ) ?

Correct AnswerverifiedShow Answer

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A firm grants trade credit with terms of 3/20,n/60 .It signifies,that if payment has not been made within days,then the full invoice price is payable within _ days.

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On May 11,you purchased $3700 of merchandise from a supplier.The terms of the sale were 1/5,net 15.The discounted amount due is _ which is payable no later than _.

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