Chapter 7 Smartbook Questions

They are the expenses that are incurred due to the fact that inventory is held.

Define carrying costs. Multiple choice question. They are the expenses that are incurred in placing and receiving orders from suppliers. They are the expenses that are incurred due to the fact that inventory is held. They are the administrative expenses and the expenses of rearranging a work center to produce an item. They are the expenses paid to suppliers for products that are purchased.

a positive

E-commerce tends to have Blank______ effect on cash flow. Multiple choice question. a positive a negative no

a strong currency

For a company that operates in several countries, the financial manager should hold cash in the country with Blank______. Multiple choice question. a weak currency an inflating currency a strong currency

transactional

For most firms the primary reason for holding cash is the Blank______ motive. Multiple choice question. compensating balance transactional precautionary

less than

Holding cash for precautionary motive assumes management wants cash for emergency purposes when inflows are __ projected. Multiple choice question. less than equal to more than

precautionary motives

Holding cash for use in case cash inflows are less than projected is holding cash for Multiple choice question. transactions compensating balance requirements precautionary motives

Increase inventory cost

Holding safety stock by a company would Multiple choice question. Only be necessary for manufacturing companies :This applies to all types of businesses. Increase inventory cost Decrease inventory cost Have no effect on costs

An aging analysis is prepared to obtain the required allowance for doubtful accounts.

How is bad debts expense calculated using the aging of accounts receivable approach? Multiple choice question. A percentage is applied to credit sales to determine bad debts expense. A percentage is applied to accounts receivable to obtain the required allowance for doubtful accounts. A percentage is applied to accounts receivable to determine bad debts expense. An aging analysis is prepared to obtain the required allowance for doubtful accounts.

improved by $2M

If a company has a daily remittance of $1M and can save 2 days in the collection process by improving the collection network, cash flow is Multiple choice question. improved by $1.5M not changed improved by $2M improved by $1M

an asset

Inventory is Blank______. Multiple choice question. an expense an asset equity a liability revenue

minimizes inventory holding costs by making products just in time for customer consumption

Just-in-time inventory Blank______. Multiple choice question. minimizes inventory holding costs by making products just in time for customer consumption reduces inventory holding cost by reducing customer customization increases inventory holding costs reduces inventory holding cost, but creates more waste

character / moral & ethical quality capital / financial resources available capacity / level of cash flows conditions / sensitivity to the economy collateral / assets that can be pledged to the loan

Match the following based on the 5 C's of credit Instructions character capital capacity conditions collateral assets that can be pledged to the loan level of cash flows financial resources available moral & ethical quality sensitivity to the economy

Treasury bills / Federal government Certificates of deposit / Domestic and foreign banks Commercial paper / Business corporations

Match the money market securities with their issuers. Instructions Treasury bills Certificates of deposit Commercial paper Federal government Business corporations Domestic and foreign banks

monies owed to a practice

Accounts receivable are Blank______. Multiple choice question. the movement of monies into or out of a business not part of the accounting process a practice's operating expenses monies owed to a practice

higher

As a general rule, the longer it is to maturity of an investment, the Blank______ the interest rate. Multiple choice question. lower higher

a decrease

As a rule, an increase in inventory will result in Blank______ in the cash balance. Multiple choice question. a decrease an increase no change

shorten

As a rule, e commerce tends to Blank______ the cash flow cycle. Multiple choice question. have no affect lengthen shorten

insurance on inventory in the warehouse

Ordering costs do not include Blank______. Multiple choice question. time spent expediting orders time spent finding suppliers insurance on inventory in the warehouse receiving costs

incremental costs of placing an order for inventory.

Ordering costs refer to the: Multiple choice question. incremental costs of placing an order for inventory. costs of holding inventory. purchase costs of inventory. costs of running out of inventory.

$990 if paid within 10 days $1,000 if paid on day 11 or later

Select all that apply Acme Company has a credit terms policy of 1/10 net 30. For an invoice of $1,000 the customer would pay Multiple select question. $1,000 if paid within 10 days $990 if paid within 10 days $990 if paid on day 11 or later $1,000 if paid on day 11 or later

carrying costs go up overall ordering costs go down

Select all that apply As the inventory order size goes up, Blank______. Multiple select question. carrying costs go down overall ordering costs go up carrying costs go up overall ordering costs go down

overall ordering costs go down carrying costs go up

Select all that apply As the inventory order size goes up, Blank______. Multiple select question. carrying costs go down overall ordering costs go up overall ordering costs go down carrying costs go up

monthly weekly daily

Select all that apply Cash balances are largely determined by cash flowing through the business on a Blank______ basis as determined by the cash flow cycle. Multiple select question. monthly weekly daily hourly

improving collections shortening credit terms extending disbursements

Select all that apply Cash flow can be improved by Multiple select question. improving collections shortening credit terms extending disbursements offering credit terms

social security payroll tax refunds

Select all that apply Common examples of Automated Clearinghouse (ACH) transfers include Blank______. Multiple select question. social security used to increase float payroll tax refunds

problems if supplier cannot deliver lost sales if sales increase rapidly lower carrying costs

Select all that apply Just in Time (JIT) inventory management may result in Multiple select question. problems if supplier cannot deliver lost sales if sales increase rapidly lower carrying costs higher carrying costs

equipment breakdowns production delays weather

Select all that apply Maintaining a safety stock will guard against late deliveries due to: Multiple select question. increase in distribution cost equipment breakdowns production delays weather

are federally insured highly liquid

Select all that apply Money market accounts: Multiple select question. allow unlimited transactions. are federally insured highly liquid secured

may be used by individuals or corporations usually have a $1,000 minimum balance

Select all that apply Money market accounts: Multiple select question. may be used by individuals or corporations usually have a $1,000 minimum balance usually have a $100,000 minimum balance usually have a $10,000 minimum balance

are issued by banks unsecured promissory notes

Select all that apply Money market securities: Multiple select question. usually have a maturity period of 2-3 years are issued by banks usually are considered less liquid unsecured promissory notes

preparing purchase orders transportation in

Select all that apply Ordering costs include Blank______. Multiple select question. the loss of quantity discounts on purchases preparing purchase orders transportation in interest on capital tied up in inventory

Preparing purchase orders Transportation

Select all that apply Ordering costs include which of the following? Multiple select question. Interest on capital tied up in inventory The loss of quantity discounts on purchases Preparing purchase orders Transportation

credit standards terms of trade collection policy

Select all that apply Primary credit policy variables that should be considered when considering extending credit are Multiple select question. credit standards warranty policies terms of trade collection policy

carrying cost per unit total sales in units ordering costs per order

Select all that apply The Economic Order Quantity is determined by _______. Multiple select question. carrying cost per unit total sales in units ordering costs per order sales on credit

minimise the costs of shortages. increase the inventory carrying costs.

Select all that apply The provision for safety stock will: Multiple select question. increase the costs of shortages. decrease the inventory carrying costs. minimise the costs of shortages. increase the inventory carrying costs.

Financial managers seek ways to keep cash to a minimum limit. Managing cash is more sophisticated in 21st century. Minimum cash along with accurate knowledge helps to improve corporate profitability.

Select all that apply Which of the following is correct for cash management: Multiple select question. More cash is generally considered better. Financial managers seek ways to keep cash to a minimum limit. Managing cash is more sophisticated in 21st century. Minimum cash along with accurate knowledge helps to improve corporate profitability.

a check is not used payment is automatically charged to the customer's account float time is reduced

Select all that apply With Electronic Funds Transfer Multiple select question. float time is increased a check is not used payment is automatically charged to the customer's account float time is reduced

payment is automatically charged to the customer's account float time is reduced a check is not used

Select all that apply With Electronic Funds Transfer Multiple select question. float time is increased payment is automatically charged to the customer's account float time is reduced a check is not used

the average number of days it takes to collect on account.

The average collection period indicates Multiple choice question. the average number of days it takes to collect on account. the percentage of sales financed with accounts receivable. the number of times the average accounts receivable balance is collected. the ratio of ending accounts receivables outstanding as compared to sales.

shortage cost per unit.

The economic order quantity does not consider: Multiple choice question. annual inventory requirement. cost per order. annual carrying costs per unit. shortage cost per unit.

optimal inventory order size

The economic order quantity is a company's Multiple choice question. optimal inventory order size projected inventory level least desirable inventory level optimal inventory level

deliver the minimum amount of inventory just in time to go on the assembly line

The goal of just-in-time inventory is to: Multiple choice question. provide inventory with minimal quality deliver the minimum amount of inventory just in time to go on the assembly line provide maximum inventory, regardless of cost provide inventory at the end of the process for the customer

the sale

The starting point to calculate cash flow is Blank______. Multiple choice question. credit sales purchases the sale

decrease

The value of a long term investment issued at 4% interest would Blank______ in value if rates climb to 6% before maturity. Multiple choice question. increase decrease remain the same

True

There is a direct relationship between the number of accounts receivable collection days and the accounts receivable balance. True false question.

sweep accounts

Bank accounts that allow companies to maintain a zero balance (or a specific minimum balance) in a non-interest bearing checking account by automatically moving funds to and from an interest-bearing account are called: Multiple choice question. money market accounts compensating balance accounts sweep accounts accounts payable

foreign

Bankers' acceptance are generally used for what type of transaction? Multiple choice question. foreign business to consumer domestic electronic

the cash budget

A common tool to track cash flows and cash balances is Multiple choice question. the cash budget the balance sheet the income statement the sales forecast

a smaller

A company with a 30 day credit policy is likely to have Blank______ need for cash as a company with a 60 day credit policy. Multiple choice question. a greater the same a smaller

a minimum bank balance required by a loan agreement

A compensating balance is Multiple choice question. a minimum bank balance required by a loan agreement a minimum collateral requirement for a loan a reserve for bad accounts receivables

Minimum inventory level that takes into account uncertainties and time lags

A firm's safety stock represents the Multiple choice question. Minimum inventory level that takes into account uncertainties and time lags Inventory that has passed the quality control inspection process Set of most often sold inventory items Largest order size that can be made to minimize order costs

increased

A matter of concern for some corporations is that accounts receivable as a percentage of total assets have Blank______ relative to inventory. Multiple choice question. decreased increased stayed the same

savings instrument

A money market fund is a Blank______. Multiple choice question. savings instrument stock option credit account

costs of storage space (rent, utilities, depreciation, etc.).

Carrying costs are the: Multiple choice question. cost of idle workers when raw materials are unavailable. costs spent waiting for suppliers to provide raw materials. loss of quantity discounts on purchases. costs of storage space (rent, utilities, depreciation, etc.).