FIN Quiz Ch. 16

Kurt's Music has a line of credit with a local bank that permits it to borrow up to $650,000 at any time. The interest rate is .64 percent per month. The bank charges compound interest and also requires that 2 percent of the amount borrowed be deposited into a non-interest-bearing account. How much interest will the firm pay if it needs $200,000 of cash for three months to pay its operating expenses? $3,949.21 $4,017.02 $3,864.63 $3,902.11 $3,943.50

$3,943.50

NuParts, Inc., has estimated quarterly sales for next year, starting with Quarter 1, of $15,900, $16,800, $17,500, and $16,400. Purchases are equal to 67 percent of the following quarter's sales and the accounts payable period is 60 days. Assume 30 days in each month. How much will the firm owe its suppliers at the end of Quarter 3? $7,066.67 $7,816.67 $6,933.33 $7,506.67 $7,325.33

$7,325.33

Steep Mountain Oil has a cash balance of $15and a short-term loan balance of $53 at the beginning of Q1. The net cash outflow for Q1of $39and for Q2 there is a net cash inflow of $23. All cash shortfalls are funded with short-term debt. The firm pays 1.1 percent of its prior quarter's ending loan balance as interest each quarter. The minimum cash balance is $15. What is the short-term loan balance at the end of the Q2? $70.6 $76.8 $67.7 $65.9 $81.3

$70.6

A firm has an average collection period of 37 days and factors all of its receivables immediately at a discount of .98 percent. Assume all accounts are collected in full. What is the firm's effective cost of borrowing? 10.20 percent 10.24 percent 9.98 percent 10.13 percent 10.38 percent

10.24 percent

Kar's currently has a 208-day operating cycle. The company is concentrating on increasing its inventory turnover rate from 7.9 to 8.2 times. What will the firm's new operating cycle be if it can effectively make this change? 207.64 days 206.31 days 209.69 days 207.14 days 208.86 days

206.31 days

Which statement is true? Decreasing the inventory period will automatically decrease the payables period. Both the operating cycle and the cash cycle must be positive values. The longer the cash cycle, the more cash a firm typically has available to invest. If a firm decreases its inventory period, its accounts receivable period will also decrease. A firm would prefer a negative cash cycle over a positive cash cycle.

A firm would prefer a negative cash cycle over a positive cash cycle.

The Green Pickle has estimated quarterly sales for next year, starting with Quarter I, of $18,600, $21,300, $24,500, and $19,600.The accounts receivable period is 18 days. What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days. $4,667 $4,900 $4,333 $4,600 $4,500

Accounts receivable at end of Q3 :24500 * 18 /90 = 4900 correct option is "B" **3 month or 90 days $4,900

Which of these is a use of cash? Decreasing accounts payable Decreasing fixed assets Issuing new shares of stock Decreasing accounts receivable Decreasing inventory

Decreasing accounts payable

Which of these activities is a source of cash? Increasing fixed assets Repurchasing shares of stock Increasing inventory Decreasing accounts receivable Decreasing long-term debt

Decreasing accounts receivable

Dover Wholesalers sells products exclusively to Benn Retailer. Benn Retailer buys exclusively from Dover Wholesalers. Dover Wholesalers has a receivables period of 44 days, an inventory period of 8 days, and a payables period of 63 days. Benn Retailer has an inventory period of 15 days, a receivables period of 22 days, and a payables period of 44 days. Which statement is correct given this information? Dover Wholesalers is financing 100 percent of Benn Retailer's operating cycle. Dover Wholesalers has a cash cycle of 11 days. Dover Wholesalers has a shorter operating cycle than does Benn Retailer. It takes Benn Retailer less time to collect payment on a sale than it does for the firm to sell its inventory. Benn Retailer has an operating cycle of 81 days.

Dover Wholesalers is financing 100 percent of Benn Retailer's operating cycle.

A flexible short-term financial policy will tend to have more of which of the following than a restrictive short-term financial policy will? I. Uncollectable accounts receivable II. Work stoppages for lack of raw materials III. Carrying costs IV. Obsolete or out-of-date inventory I, III, and IV only I, II, and III only I and II only III and IV only II and III only

I, III, and IV only

Which of the following are sources of cash? I. Decreasing accounts receivable II. Increasing inventory III. Increasing accounts payable IV. Increasing common stock II and IV only II and III only I, III, and IV only I and IV only

I, III, and IV only

Which of the following tend to rise when a firm switches to a flexible financial policy from a restrictive financial policy? I. Restocking costs II. Price reductions to offset limited selection III. Storage costs IV. Current asset opportunity costs

III and IV only

Which statement is true? The payables period must be shorter than the receivables period. An increase in the inventory turnover rate must increase the cash cycle. A decrease in the accounts receivable turnover rate decreases the cash cycle. The number of days in the cash cycle can be positive, negative, or equal to zero. Paying a supplier within the discount period rather than waiting until the end of the normal credit period will decrease the cash cycle.

The number of days in the cash cycle can be positive, negative, or equal to zero.

The length of time a retailer owes its supplier for an inventory purchase is called the: cash cycle. accounts receivable period. accounts payable period. operating cycle. inventory period.

accounts payable period.

The cash cycle is equal to the: inventory period minus the accounts receivable period minus the accounts payable period. accounts receivable period minus the accounts payable period plus the inventory period. inventory period minus the accounts payable period. operating cycle minus the accounts receivable period. operating cycle plus the accounts payable period.

accounts receivable period minus the accounts payable period plus the inventory period.

The operating cycle is equal to the: accounts receivable period plus the cash cycle. accounts receivable period plus the inventory period. inventory period plus the cash cycle. inventory period minus the accounts payable period plus the accounts receivable period. inventory period plus the accounts payable period.

accounts receivable period plus the inventory period.

AC Sales has estimated quarterly sales for next year, starting with Quarter 1, of $16,200, $17,300, $18,700, and $20,400. If purchases are equal to 72 percent of the following quarter's sales, what is the estimated amount of purchases for Quarter 2?' $13,464 $13,720 $12,456 $12,960 $14,688

estimated amount of purchases for Quarter 2=(72%*18700) which is equal to =$13464(D).

An increase in the accounts receivable period is most apt to: shorten the inventory period. lengthen the cash cycle. lengthen the accounts payable period. shorten the accounts payable period. shorten the operating cycle.

lengthen the cash cycle.