Chapter 11 - TM

Using the above information, what is the cash turnover for the company? A. 5.3 times B. 7.7 times C. 24.3 times D. 2.7 times

A. 5.3 times

Amalgamated Binding Consolidators takes 20 days to convert its raw materials to finished goods, 5 days to sell it, and 15 days to collect its credit sales. What is the company's days receivable period? A. 5 days B. 15 days C. 20 days D. 40 days

B. 15 days

Given a cash conversion cycle of 81.04 days, how many CCCs are there in a year (cash turnover ratio)?

4.5 times

Describe two situations when a buyer should forgo an offered cash discount.

•When buyer has to borrow funds at interest rate that exceeds effective cost of discount •When buyer has enough cash to pay A/P by discount date but can earn a rate that exceeds effective cost of discount.

Company Q has average daily credit sales of $15,875.00. The daily cash sales are $8,750.00. The AR ending balance for June 30 is $387,500.00. What is the average days sales outstanding for Company Q? A. 24.41 B. 0.04 C. 15.74 D. 0.06

A. 24.41

What can a treasury professional discover by monitoring individual accounts receivable? A. Errors or delays in payments by credit card that are slowing collections B. Customers that delay payment intentionally until follow-up is initiated C. Change in financial condition that may result in slower payments and require extension of longer credit terms D. Increase in receivables that affects liquidity

B. Customers that delay payment intentionally until follow-up is initiated

ABC Company offers a discount of 2/10, net 30 to its customers. ABC factored its accounts receivables with an outside vendor, under a with recourse arrangement. What impact might this have on the company? A. Increase days sales outstanding B. Improve cash conversion cycle C. Reduce bad debt expense D. More customers may take the discount

B. Improve cash conversion cycle

The company currently calculates its Days Receivables at 42 days, its Days Payables at 31 days, and its Days Inventory at 58 days. What is the cash conversion cycle for the company? A. 131 days B. 15 days C. 69 days D. 47 days

C. 69 days

A manufacturing company is working to improve its cash conversion cycle. Factory production has increased over the last year to increase inventory levels. They have an inventory turnover of 3.1 and asset turnover of 5.0. The company has a days payable of 30 and a days receivable of 60. It has started enforcing its net 30 terms and placed customers with balances outstanding more than 45 days on credit hold. As a result, the company collected receivables quicker but it suffered a 10% loss in sales. What can the company do to reduce its cash conversion cycle? A. Pay vendors in advance B. Decrease the days payable C. Extend payables deferral period D. Revise credit policy to be more lenient

C. Extend payables deferral period