Question 1

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

Accepted Answer

The controller is responsible for overseeing the accounting department and ensuring accurate financial reporting, including information concerning cash flows. The payables manager is responsible for managing the company's accounts payable, the credit manager is responsible for managing credit and collections, the purchasing manager is responsible for managing the company's purchasing activities, and the production manager is responsible for managing the production process.

Question 2

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 3

If you delay paying your suppliers by an additional ten days,then:

Accepted Answer

By delaying payments to suppliers, you retain cash longer, reducing the need for bank financing.

Question 4

ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The firm is now changing its policy and only producing a product when it receives an actual order from a customer. All else equal,this change will:

Accepted Answer

By only producing products when they receive orders from customers, ABC Manufacturing will no longer be holding excess inventory, which will decrease the cash cycle. The operating cycle may remain the same or decrease, depending on how quickly the firm is able to produce and deliver products to customers. Shortening the accounts payable period is unlikely since suppliers will still expect to receive payment within a certain timeframe, and lengthening the accounts receivable period is also unlikely since customers will have already made payment when placing the order. The inventory turnover ratio may increase or decrease, depending on how efficiently the firm is able to produce and sell products.

Question 5

An increase in which one of the following is most apt to be an indicator of an accounts receivable policy that is too restrictive?

Accepted Answer

A high accounts receivable turnover rate indicates that the company is collecting its receivables quickly, which may suggest that the credit policy is too restrictive, limiting sales opportunities.

Question 6

A restrictive short-term financial policy tends to:

Accepted Answer

A restrictive short-term financial policy, such as limiting credit to customers, can lead to decreased sales in the short-term as customers may choose other vendors who offer more flexible terms. This can ultimately result in reduced future sales as well.

Question 7

A restrictive short-term financial policy,as compared to a more flexible policy,tends to: I. cause a firm to lose sales due to a lack of inventory on hand.
II) increase the sales of a firm due to the firm's credit availability and terms.
III) increase the probability that a firm will face a cash-out situation.
IV) increase the ability of a firm to charge premium prices.

Accepted Answer

A restrictive short-term financial policy means that a firm is limiting its current assets such as inventory, accounts receivable, and cash to reduce the risk of facing a cash-out situation. This policy can lead to a lack of inventory on hand, causing the firm to lose sales (I), and a higher probability of facing a cash-out situation (III). However, it may not increase the sales of a firm due to limited credit availability and terms (II). It also may not increase the firm's ability to charge premium prices (IV) as premium pricing depends on the market demand for the product or service.

Question 8

Which one of the following will decrease the operating cycle?

Accepted Answer

Collecting accounts receivable faster will decrease the operating cycle by reducing the time it takes for a company to collect cash from its customers. This, in turn, will improve the cash conversion cycle, which is a measure of how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The other choices would not necessarily decrease the operating cycle or could potentially increase it.

Question 9

Which one of the following will increase the cash cycle?

Accepted Answer

Paying your suppliers earlier means you have less cash on hand for a longer period of time, thereby increasing the cash cycle.

Question 10

Flexible short-term financial policies tend to:

Accepted Answer

Flexible short-term financial policies often involve maintaining large cash balances to ensure liquidity and the ability to respond to unexpected opportunities or needs.

Question 11

Which one of the following will increase the accounts payable period,all else constant?

Accepted Answer

An increase in the ending accounts payable balance will increase the accounts payable period. This is because the accounts payable period is calculated as the average accounts payable balance divided by the daily cost of goods sold. An increase in the ending accounts payable balance will increase the average accounts payable balance, which in turn will increase the accounts payable period.

Question 12

The short-term financial policy that a firm adopts will be reflected in:

Accepted Answer

The short-term financial policy of a firm involves managing its current assets and liabilities. Therefore, the firm's investment in current assets and the financing of current assets will reflect its short-term financial policy. The financing of fixed assets is related to the long-term financial policy of the firm.

Question 13

Which of the following are associated with a restrictive short-term financial policy?
I. large investments in marketable securities
II. liberal credit terms for customers
III. minimal cash balances
IV. minimal credit sales

Accepted Answer

The answer of Which of the following are associated with...

Question 14

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

Accepted Answer

The operating cycle is the time it takes for a company to convert its inventory and receivables into cash. Decreasing the payables turnover from 7 times to 6 times will not affect the operating cycle because it does not involve inventory or receivables. The other options involve changes to inventory, receivables, or credit repayment times, which will affect the operating cycle in some way.

Question 15

An increase in which one of the following will decrease the cash cycle,all else equal?

Accepted Answer

An increase in the inventory turnover rate means that inventory is being sold more quickly, which reduces the days sales in inventory and thus decreases the cash cycle.

Question 16

Which one of the following statements is correct concerning the cash cycle?

Accepted Answer

A longer cash cycle means that a firm is holding onto its cash for longer periods of time, leading to a greater need for external financing to pay for expenses in the meantime.

Question 17

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

Accepted Answer

The credit manager is typically responsible for establishing the company's accounts receivable policy, which outlines the terms and conditions for extending credit to customers and collecting on outstanding debts. The purchasing manager is responsible for procuring goods and services, the controller oversees the overall financial operations of the company, the production manager is responsible for overseeing the production process, and the payables manager is responsible for managing the company's accounts payable.

Question 18

Which of the following actions will tend to decrease the accounts receivable period?
I. loosening the standards for granting credit to customers
II. increasing the discount for early payment by credit customers
III. increasing the finance charges applied to all customer balances outstanding over thirty days
IV. granting discounts for cash sales

Accepted Answer

Increasing the discount for early payment and increasing finance charges for overdue balances encourage quicker payment, thus decreasing the accounts receivable period. Granting discounts for cash sales also encourages immediate payment.

Question 19

Which of the following actions will tend to decrease the inventory period?
I. discontinuing all slow-selling merchandise
II. selling obsolete inventory below cost just to get rid of it
III. buying raw materials only as they are needed in the manufacturing process
IV. producing goods on demand versus for inventory

Accepted Answer

Discontinuing slow-selling merchandise, selling obsolete inventory, buying raw materials as needed, and producing goods on demand all reduce the time inventory is held, thus decreasing the inventory period.

Question 20

Which one of the following statements concerning the cash cycle is correct?

Accepted Answer

A negative cash cycle indicates that a company is able to collect cash from sales before it needs to pay its suppliers, which is generally favorable for cash flow management.

Quiz 26: Short-Term Finance and Planning

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

Which one of the following will decrease the operating cycle?

If you delay paying your suppliers by an additional ten days,then:

ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The firm is now changing its policy and only producing a product when it receives an actual order from a customer. All else equal,this change will:

An increase in which one of the following is most apt to be an indicator of an accounts receivable policy that is too restrictive?

A restrictive short-term financial policy tends to:

Which one of the following will decrease the operating cycle?

Which one of the following will increase the cash cycle?

Flexible short-term financial policies tend to:

Which one of the following will increase the accounts payable period,all else constant?

The short-term financial policy that a firm adopts will be reflected in:

Which of the following are associated with a restrictive short-term financial policy? I. large investments in marketable securities II. liberal credit terms for customers III. minimal cash balances IV. minimal credit sales

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

An increase in which one of the following will decrease the cash cycle,all else equal?

Which one of the following statements is correct concerning the cash cycle?

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

Which one of the following statements concerning the cash cycle is correct?