Question 1

The ___________ is generally responsible for monitoring short-term investment and borrowing activities.

Accepted Answer

The Cash Manager is generally responsible for monitoring short-term investment and borrowing activities, ensuring that the company has enough liquidity to meet its short-term obligations.

Question 2

Which one of the following managers is most likely in charge of establishing the accounts receivable policy?

Accepted Answer

The credit manager typically oversees the organization's credit policies, including establishing the accounts receivable policy.

Question 3

Costs of the firm that fall with increased levels of investment in its current assets are called:

Accepted Answer

The answer of Costs of the firm that fall with...

Question 4

If your accounts receivable period is 30 days, you will collect payment for your _____ sales during the second quarter of a calendar year.

Accepted Answer

The answer of If your accounts receivable period is 30...

Question 5

The process that transfers the responsibility for collecting accounts receivables from a firm to a bank in exchange for a percent of the accounts receivables value is referred to as:

Accepted Answer

Factoring involves a business selling its accounts receivables to a third party (the factor, often a bank) at a discount, in exchange for immediate cash. This process transfers the responsibility of collecting the receivables from the firm to the factor.

Question 6

Which one of the following will decrease the operating cycle?

Accepted Answer

Collecting accounts receivable faster will decrease the operating cycle as it shortens the time it takes for the company to receive cash from customers.

Question 7

Which of the following would result in an increase in cash?

Accepted Answer

Obtaining a long-term bank loan increases cash as it provides the company with additional funds.

Question 8

Your key supplier has decided to change the terms of your credit arrangement from net 45 to net 30. This action will _____ your accounts payable period and _____ your cash cycle.

Accepted Answer

Changing the terms from net 45 to net 30 decreases the accounts payable period, as you now have less time to pay your invoices. This, in turn, increases your cash cycle because you have to pay out cash sooner, reducing the time your cash is available for other uses.

Question 9

Which one of the following is a use of cash?

Accepted Answer

A decrease in equity represents a use of cash, as it indicates that cash has been used to buy back shares or pay dividends.

Question 10

Which one of the following statements concerning inventory loans is correct?

Accepted Answer

The answer of Which one of the following statements concerning...

Question 11

Which of the following is a source of cash, all else the same?

Accepted Answer

Factoring accounts receivable is a source of cash because it involves selling your receivables to a factor (a third party) at a discount, in exchange for immediate cash. This process provides the company with immediate liquidity.

Question 12

A disruption in the production schedule due to a lack of materials is called a:

Accepted Answer

A disruption in the production schedule due to a lack of materials leads to a shortage cost. This cost can include lost sales, backorders, and the cost of expediting shipments, among other consequences.

Question 13

The Lumber Yard has installed a new inventory control system which will improve the efficiency of the operations and reduce excess inventory. This system will _____ the inventory period and _____ the cash cycle.

Accepted Answer

The new inventory control system will decrease the inventory period by improving efficiency and reducing excess inventory, which in turn will decrease the cash cycle by allowing the company to convert inventory into cash more quickly.

Question 14

The manager responsible for the accounting information concerning cash flows is the:

Accepted Answer

The controller is responsible for the accounting operations of a company, which includes the production of financial reports, maintenance of an adequate system of accounting records, and a comprehensive set of controls and budgets designed to mitigate risk, enhance the accuracy of the company's reported financial results, and ensure that reported results comply with generally accepted accounting principles or international financial reporting standards. This includes information concerning cash flows.

Question 15

Which one of the following will decrease the operating cycle?

Accepted Answer

Decreasing the days sales in inventory will decrease the time it takes to sell inventory, thereby decreasing the operating cycle.

Question 16

Which one of the following will not affect the operating cycle?

Accepted Answer

The payables turnover ratio measures how quickly a company pays its suppliers, and a decrease in payables turnover would increase the cash cycle, causing a delay in payments. This will have an effect on the operating cycle. However, increasing days sales in receivables or inventory turnover rate, or increasing the average receivables balance will lengthen the operating cycle. On the other hand, decreasing the credit repayment times for the firm's customers will shorten the operating cycle.

Question 17

Which one of the following will increase the cash cycle?

Accepted Answer

Increasing the inventory level by 10% will likely increase the cash cycle because it may take longer to sell the additional inventory, thus extending the time cash is tied up in inventory.

Question 18

The Jennings Company recently hired a new chief financial officer. One of the first changes she made was to delay the payment of all bills by ten days. The net effect of this action is to decrease the:

Accepted Answer

Delaying the payment of bills by ten days increases the accounts payable period, which is a component of the cash cycle. The cash cycle is the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. By delaying payments, the company is effectively extending the time it holds onto its cash, thus decreasing the cash cycle.

Question 19

The period of time during which either liquidity reserves or external funding is needed to maintain company operations is called the:

Accepted Answer

The cash cycle refers to the period of time during which a company needs either liquidity reserves or external funding to maintain its operations. It measures the time between when a company pays for its inventory and when it receives cash from selling its products or services, thus highlighting the need for liquidity or external financing during this period.

Question 20

A firm wishes to obtain short term financing at a rate significantly below that which a bank would charge. If the firm is large and highly rated, it may be able to meet its needs by _______________.

Accepted Answer

Issuing bankers acceptances is a way for large, highly-rated firms to obtain short-term financing at lower rates than typical bank loans, as they leverage their creditworthiness to issue these instruments in the money market.

Quiz 18: Short-Term Finance and Planning

The ___________ is generally responsible for monitoring short-term investment and borrowing activities.

Which one of the following managers is most likely in charge of establishing the accounts receivable policy?

Costs of the firm that fall with increased levels of investment in its current assets are called:

If your accounts receivable period is 30 days, you will collect payment for your _____ sales during the second quarter of a calendar year.

The process that transfers the responsibility for collecting accounts receivables from a firm to a bank in exchange for a percent of the accounts receivables value is referred to as:

Which one of the following will decrease the operating cycle?

Which of the following would result in an increase in cash?

Your key supplier has decided to change the terms of your credit arrangement from net 45 to net 30. This action will _ your accounts payable period and _ your cash cycle.

Which one of the following is a use of cash?

Which one of the following statements concerning inventory loans is correct?

Which of the following is a source of cash, all else the same?

A disruption in the production schedule due to a lack of materials is called a:

The Lumber Yard has installed a new inventory control system which will improve the efficiency of the operations and reduce excess inventory. This system will _ the inventory period and _ the cash cycle.

The manager responsible for the accounting information concerning cash flows is the:

Which one of the following will decrease the operating cycle?

Which one of the following will not affect the operating cycle?

Which one of the following will increase the cash cycle?

The Jennings Company recently hired a new chief financial officer. One of the first changes she made was to delay the payment of all bills by ten days. The net effect of this action is to decrease the:

The period of time during which either liquidity reserves or external funding is needed to maintain company operations is called the:

A firm wishes to obtain short term financing at a rate significantly below that which a bank would charge. If the firm is large and highly rated, it may be able to meet its needs by _______________.