Question 1

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?

Accepted Answer

The answer of Dover Wholesalers sells products exclusively to Benn...

Question 2

Which characteristic applies to commercial paper?

Accepted Answer

Commercial paper is usually issued directly by large and creditworthy corporations with excellent credit ratings.

Question 3

Dexter Companies has a conventional factoring arrangement with its local bank.Which of these would be a common characteristic of that type of financing arrangement?

Accepted Answer

The answer of Dexter Companies has a conventional factoring arrangement...

Question 4

Which statement is correct?

Accepted Answer

The answer of Which statement is correct?
...

Question 5

The HOT Truck operates several specialty vehicles that provide hot food and beverages for firms that have workers employed in outlying regions.The company has annual sales of $489,500.Cost of goods sold average 59 percent of sales and the profit margin is 6.1 percent.The average accounts receivable balance is $41,700.On average,how long does it take this food truck to collect payment for its services?

Accepted Answer

The answer of The HOT Truck operates several specialty vehicles...

Question 6

Which statement related to a cash budget is correct?

Accepted Answer

A financially healthy firm can have a negative quarterly net cash inflow because it may be investing in new projects or facilities, which will lead to future growth and profitability. The minimum cash balance is typically set above zero to ensure that the company has enough cash on hand to cover any unexpected expenses or dips in revenue. Capital expenditures are typically treated as a cash outflow, as they represent a significant cash investment in the business. A positive net cash inflow indicates that the company had more cash coming in than going out during the period.

Question 7

Delphino's has sales for the year of $127,300 and cost of goods sold of $86,700.The firm carries an average inventory of $14,300 and has an average accounts payable balance of $13,600.What is the inventory period?

Accepted Answer

The answer of Delphino's has sales for the year of...

Question 8

Generally speaking,which of the following situations will occur if a seasonal company adopts a compromise financial policy?
I.Periods where short-term financing is required
II.Less long-term debt than if the firm followed a restrictive financial policy
III.Periods of excess funds which can be invested in short-term marketable securities
IV.Lower investment in fixed assets than if the firm adopted a flexible financial policy

Accepted Answer

A compromise financial policy usually involves a mix of short-term and long-term financing, resulting in periods where short-term financing is required (I) and excess funds that can be invested in short-term marketable securities (III). This policy typically results in less long-term debt than if the firm followed a restrictive financial policy (II), but it may result in lower investment in fixed assets than if the firm adopted a flexible financial policy (IV). Therefore, choices I, II, and III are correct, while choice IV is incorrect.

Question 9

Fun Stores has to restock a popular electronic game every three days as it completely sells out in that period of time.What is the inventory turnover rate for this game?

Accepted Answer

The inventory turnover rate is calculated by dividing the number of days in a year (365) by the number of days it takes to sell out the inventory (3). Thus, 365 / 3 = 121.67 times.

Question 10

The Corner Store is a small-sized,general store that stocks a minimal level of basic supplies and offers gasoline to a rural community.Which type of credit is probably best-suited for financing this store's inventory?

Accepted Answer

Blanket inventory lien is probably the best-suited type of credit for financing this store's inventory. This type of credit allows the lender to take a security interest in all or most of the borrower's inventory as collateral for the loan. As the store stocks a minimal level of basic supplies, it's unlikely that they would have enough accounts receivable to use receivables factoring or receivables assignment as a type of credit. Trust receipt financing and field warehousing are more suitable for businesses that deal with large volumes of goods or expensive equipment.

Question 11

A company has the following account balances.Which statement is correct concerning these balances? $\begin{array}{c}
\begin{array}{|l|}
 \hline \text {Account}\
\
 \hline \text {Accounts receivable}\
 \hline \text {Accounts payable}\
 \hline \text {Inventory}\
\hline \text {Long-tem debt}\
\hline \text {Commonstock}\
 \hline 
\end{array}
\begin{array}{c|}
 \hline \text {Beginning}\
\text {Balance}\
 \hline\$ 16,400\
 \hline20,300\
 \hline63,600\
 \hline127,500\
 \hline212,400\
 \hline
\end{array}
\begin{array}{c|}
 \hline \text {Ending}\
\text {Balance}\
 \hline\$17,800 \
 \hline24,400\
 \hline60,100\
 \hline125,800\
 \hline215,900\
 \hline 
\end{array}
\end{array}$

Accepted Answer

The answer of A company has the following account balances.Which...

Question 12

The accounts receivable turnover rate for Tall Men's Wear has gone from an average of 11.2 times to 13.8 times per year.How has this change affected the firm's accounts receivable period?

Accepted Answer

To calculate the change in accounts receivable period, we need to use the formula:

Accounts Receivable Period = (365 days) / Accounts Receivable Turnover

So, the original accounts receivable period was:

(365 days) / 11.2 times = 32.59 days

And the new accounts receivable period is:

(365 days) / 13.8 times = 26.45 days

The change in accounts receivable period is:

32.59 days - 26.45 days = 6.14 days decrease

Therefore, the correct answer is B, a decrease of 6.14 days.

Question 13

Alderson Metals is compiling a cash balance projection by quarter for next year.Which one of the following adjustments to this projection will decrease the cumulative surplus?

Accepted Answer

Increasing the dividend per share will decrease the cash balance, thus decreasing the cumulative surplus. The other choices would either decrease costs or increase cash inflows, thus increasing the cash balance and the cumulative surplus.

Question 14

To ensure an unsecured line of credit is used solely for short-term purposes,the loan arrangement frequently includes which one of the following?

Accepted Answer

The answer of To ensure an unsecured line of credit...

Question 15

Which type of financing is generally used by new car dealers to finance their inventories?

Accepted Answer

The answer of Which type of financing is generally used...

Question 16

The Big Box Store has annual credit sales of $3,268,200 and cost of goods sold of $2,428,600.The average accounts receivable balance is $39,400.How many days on average does it take the firm to collect its accounts receivable?

Accepted Answer

The answer of The Big Box Store has annual credit...

Question 17

BL Motors has sales for the year of $287,400,cost of goods sold equal to 68 percent of sales,and an average inventory of $37,800.The profit margin is 7 percent and the tax rate is 34 percent.How many days on average does it take the firm to sell an inventory item?

Accepted Answer

First, we need to calculate the cost of goods sold:
Cost of Goods Sold = 68% x $287,400 
Cost of Goods Sold = $195,672

Next, we need to calculate the average inventory turnover:
Inventory Turnover = Cost of Goods Sold / Average Inventory 
Inventory Turnover = $195,672 / $37,800 
Inventory Turnover = 5.17

Now we can calculate the number of days it takes to sell an inventory item:
Days to Sell Inventory = 365 / Inventory Turnover 
Days to Sell Inventory = 365 / 5.17 
Days to Sell Inventory = 70.60 days

Therefore, the answer is C.

Question 18

A committed line of credit:

Accepted Answer

The answer of A committed line of credit:
...

Question 19

Al's Plumbing has the following current account values.These accounts represent a net _____ of cash for the period in the amount of ____. $\begin{array}{c}
\begin{array}{|l|}
 \hline \text {Account}\
\
 \hline \text {Accounts receivable}\
 \hline \text {Accounts payable}\
 \hline \text {Inventory}\
 \hline 
\end{array}
\begin{array}{c|}
 \hline \text {Beginning}\
\text {Balance}\
 \hline\$ 32,800 \
 \hline29,700\
 \hline52,600\
 \hline
\end{array}
\begin{array}{c|}
 \hline \text {Ending}\
\text {Balance}\
 \hline\$ 31,300 \
 \hline26,500\
 \hline54,200\
 \hline 
\end{array}
\end{array}$

Accepted Answer

The answer of Al's Plumbing has the following current account...

Question 20

The High Water Mark is operating at its optimal point.Which one of the following conditions exists given this firm's operating status?

Accepted Answer

The answer of The High Water Mark is operating at...

Quiz 16: Short-Term Financial Planning