Working Cap Midterm

"When it comes to Audit Opinions, firms would like "

Unqualified

Which is NOT a source of cash for a company?

An increase in Accounts Receivables

MCA, Inc. upgraded the treasury workstation that had been in place for two years and used data from that 24-month period to develop a new short-term forecast. A trend factor was applied to controlled disbursements of 97% on a month-by-month basis and the variance to actual disbursements is less than 1%. Which of the following model validation techniques was utilized? A. In-sample validation B. Documentation validation C. Ongoing validation D. Comparison validation

A. In-sample validation

Company R has an AR collection pattern of 8% in the current month, 47% in the first month, 30% in the second month, 10% in the third month, and 5% in the fourth month. If AR for July is $598,000, what amount of cash do they expect to collect in October? "A. $281,060 " "B. $59,800 " "C. $179,400 " "D. $47,840"

B. $59,800

Using the info below what is the Days Payables (DP)? Annual Revenue $158,000.00 Annual Cost of Goods Sold $92,400.00 Cash Flow from Operations $850.00 Ending Inventory $23,600.00 Ending Accounts Receivable $19,300.00 Ending Accounts Payable $16,950.00 A. $262.15 B. $93.23 C. $39.16 D. $66.96

D. $66.96

Company XYZ is a manufacturer of industrial equipment and has enjoyed a large percentage increase in profits from a small increase in revenues. Sales recently plummeted resulting in steep decline in profitability. Which of the following BEST describes the cost structure of the company? A. Low contribution margin B. High financial leverage C. Low variable costs D. High operating leverage

D. High operating leverage

A daily short-term forecast and variance analysis for LMN, Inc. is updated with relevant trends and actual data every Monday. Upon review, the treasurer assessed that sales were higher than forecasted, inventory was up and yields being earned on excess cash were lower. The MOST important reason for this cash forecast process is: A. Financial control B. Managing costs C. Capital budgeting D. Liquidity management

D. Liquidity management

"Company ABC is a restaurant chain that has enjoyed a surge in customers dining with not much of a profitability increase in the last couple of years. Following a bad restaurant review, customer traffic deteriorated with not much change in profitability. Which of the following BEST describes the cost structure of the company? " A. Low variable costs B. Economies of scale C. Low financial leverage D. Low operating leverage

D. Low operating leverage

Examples of fixed assets include which of the following? I. Inventory II. Treasury bills III. Forklift IV. Goodwill

III only

Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT:

Inventory

Which of the following is a ratio that is often used by commercial banks to measure a company s leverage and does not include the effect of assets that are difficult to value or are NOT easily converted to cash? A. Long-term debt to capital B. Debt to tangible net worth C. Total liabilities to total assets D. Cash flow to total debt

B. Debt to tangible net worth

Which of the following are important uses of variance analysis in comparing actual cash flows with projected cash flows? I. Identifying unanticipated changes in inventory II. Enhancing short-term investment income III. Validating a capital budget IV. Identifying delays in accounts receivable collections A. I and II only B. I and IV only C. II and IV only "D. I, II, III, and IV"

B. I and IV only

An analyst for a landscaping company wants to adjust her cash-flow forecast to account for the seasonality of outflows. How can this be accomplished? A. Simple moving average B. Regression analysis C. Accounts receivable balance pattern D. Contingency forecasting

B. Regression analysis

"A company is experiencing the following long-term trend on a month-over-month basis: Sales are increasing by $100,000, a 15% increase. Accounts receivable are increasing by $5,000, a 1% increase. Accounts payable are increasing by $20,000, a 4% increase. Labor expenses are increasing by $40,000, a 3% increase. With all other income, expenses, long-term assets and liabilities remaining stable, this trend would MOST LIKELY prompt what action by the company? " A. Financing working capital requirements B. Repaying short-term debt C. Reducing labor costs D. Factoring accounts receivable

B. Repaying short-term debt

All of the following are advantages of using traditional financial ratios for analysis EXCEPT: A. They can easily be computed from the information found in publicly available financial reports B. They usually reflect accounting rather than economic values C. They can be used to view historical trends and availability over time D. They allow comparisons to be made between like companies

B. They usually reflect accounting rather than economic values

Using the info below what is the Days Receivables (DR)? Annual Revenue $158,000.00 Annual Cost of Goods Sold $92,400.00 Cash Flow from Operations $850.00 Ending Inventory $23,600.00 Ending Accounts Receivable $19,300.00 Ending Accounts Payable $16,950.00 A. $2,988.08 B. $298.50 C. $44.59 D. $76.24

C. $44.59

Using the info below what is the Days Inventory (DI)? Annual Revenue $158,000.00 Annual Cost of Goods Sold $92,400.00 Cash Flow from Operations $850.00 Ending Inventory $23,600.00 Ending Accounts Receivable $19,300.00 Ending Accounts Payable $16,950.00 A. $446.32 B. $1,429.07 C. $93.23 D. $508.20

C. $93.23

"In evaluating alternative capital investments, a company should consider qualitative factors such as: " A. Projected cash flows B. Estimated economic returns C. Corporate strategy D. Estimated costs

C. Corporate strategy

The treasury manager of a chain of clothing stores wants to develop a medium-term forecast. Management plans to open two new stores, and anticipates same-store sales to increase by 15%. Which of the following items can be predicted with the highest degree of certainty? A. Taxes on stock options B. New product sales C. Fixed bond interest payment D. Refranchising proceeds

C. Fixed bond interest payment

The matching principle in regards to accrual accounting is

Recognize the expenses incurred to generate earned revenues