Question 1

If a firm's credit period is decreased,the sales volume can be expected to ________,the investment in accounts receivable can be expected to ________,and the bad debt expenses can be expected to ________.
A)increase; decrease; decrease
B)increase; increase; decrease
C)increase; increase; increase
D)decrease; decrease; decrease

Accepted Answer

If a firm's credit period is decreased, customers will have less time to pay for their purchases, which may lead to a decrease in sales volume. Additionally, the investment in accounts receivable (the amount of money tied up in unpaid customer invoices) can be expected to decrease because customers are paying more quickly. This decrease in accounts receivable could help the firm to free up cash for other investments or operations. Finally, reducing the credit period may also help to decrease the bad debt expense because customers will have less time to default on their payments.

Question 2

What is the firm's marginal profit contribution from sales under the proposed plan of initiating the cash discount? (See Table 14.7)
A)$22,500
B)$40,000
C)$62,500
D)$100,000

Accepted Answer

The marginal profit contribution is calculated by considering the additional revenue generated from the sales minus the additional costs incurred. Based on the information provided in Table 14.7, the correct calculation leads to a marginal profit contribution of $62,500.

Question 3

What is the marginal investment in accounts receivable under the proposed plan? (See Table 14.7)
A)$1,234,375
B)$1,382,500
C)$1,567,300
D)$1,841,570

Accepted Answer

The marginal investment in accounts receivable is the difference between the proposed plan's accounts receivable and the current plan's accounts receivable. The proposed plan's accounts receivable is $1,841,570 and the current plan's accounts receivable is $607,195. Therefore, the marginal investment in accounts receivable is $1,841,570 - $607,195 = $1,234,375.

Question 4

Table 14.6
A breakdown of Teffan,Inc.'s outstanding accounts receivable dated June 30,2019 on the basis of the month in which the credit sale was initially made follows.The firm extends 30-day credit terms. 
-An evaluation of the firm's collection efforts based on the aging schedule would suggest ________.(See Table 14.6)
A)poor credit management
B)satisfactory credit management
C)superior credit management
D)overzealous collection efforts

Accepted Answer

According to the aging schedule, there are a significant number of accounts that are 31-60 days past due and some accounts are even more than 60 days past due. This suggests that the firm's credit management is poor as they are not able to collect the outstanding accounts receivable within the credit period. They need to improve their collection efforts to avoid any cash flow issues.

Question 5

An increase in collection efforts by a firm will result in ________ in sales volume,________ in the investment in accounts receivable,________ in bad debt expenses,and ________ in collection expenditures.
A)an increase; a decrease; an increase; a decrease
B)an increase; a decrease; a decrease; an increase
C)an increase; a decrease; an increase; an increase
D)a decrease; a decrease; a decrease; an increase

Accepted Answer

The answer of An increase in collection efforts by a...

Question 6

Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer.

Accepted Answer

The answer of Float exists when a payee has received...

Question 7

What are the savings of marginal bad debts under the proposed plan? (See Table 14.7)
A)$500,000
B)$50,000
C)$10,000
D)$5,000

Accepted Answer

The savings of marginal bad debts under the proposed plan is $50,000 as indicated in Table 14.7.

Question 8

What is the net result of increasing the cash discount? (See Table 14.7)
A)+$33,750
B)-$33,750
C)+$128,750
D)-$58,750

Accepted Answer

The answer of What is the net result of increasing...

Question 9

Table 14.6
A breakdown of Teffan,Inc.'s outstanding accounts receivable dated June 30,2019 on the basis of the month in which the credit sale was initially made follows.The firm extends 30-day credit terms. 
-Accounts receivable over 90 days total ________.(See Table 14.6)
A)$200,000
B)$470,000
C)$300,000
D)$100,000

Accepted Answer

The answer of Table 14.6
A breakdown of Teffan,Inc.'s outstanding accounts...

Question 10

Mail float is the delay between the deposit of a check by a payee and the actual availability of the funds.

Accepted Answer

The answer of Mail float is the delay between the...

Question 11

What is the cost of marginal investment in accounts receivable under the proposed plan? (See Table 14.7)
A)$313,460
B)$276,500
C)$246,875
D)$368,314

Accepted Answer

The answer of What is the cost of marginal investment...

Question 12

Assuming that a firm has done all it can to stimulate customers to pay promptly and to select vendors offering the most attractive and flexible credit terms,it can further speed collections and slow disbursements by taking advantage of the "float" existing in the collection and payment systems.

Accepted Answer

This statement is true. By taking advantage of the float (the time lag between when a payment is made and when it is received) in the collection and payment systems, a firm can further speed up collections and slow down disbursements. This can be done by implementing electronic payments, using lockboxes, or delaying payments until the last possible moment.

Question 13

Ashley's Ad Agency's accounts receivable totaled $451,000 on January 30,2019.An aging summary of receivables at this date follows:  The firm extends 30-day credit terms to all its credit customers.
(a)Prepare an aging schedule for Ashley's Ad Agency.
(b)Evaluate the firm's collection performance.

Accepted Answer

The answer of Ashley's Ad Agency's accounts receivable totaled $451,000...

Question 14

What is the cost of the marginal cash discount? (See Table 14.7)
A)$768,750
B)$300,000
C)$307,500
D)$230,625

Accepted Answer

The answer of What is the cost of the marginal...

Question 15

The entire process resulting from a check issue and mail by a payer company to a payee company (i.e.,mail float,processing float,and clearing float)is disbursement float to the payer company and is collection float to the payee company.

Accepted Answer

Disbursement float refers to the time taken for the payer company's funds to be deducted from their account after issuing a check, while collection float refers to the time taken for the payee company to receive and deposit the check, and for the funds to become available in their account. Therefore, the entire process results in disbursement float for the payer company and collection float for the payee company.

Question 16

A decrease in collection efforts by a firm will result in ________ in sales volume,________ in the investment in accounts receivable,________ in bad debt expenses,and ________ in collection expenditures.
A)an increase; an increase; an increase; a decrease
B)an increase; a decrease; an increase; an increase
C)an increase; a decrease; an increase; a decrease
D)a decrease; a decrease; a decrease; an increase

Accepted Answer

A decrease in collection efforts typically leads to an increase in sales volume because less stringent credit policies can attract more customers. However, this also results in an increase in the investment in accounts receivable, as more sales on credit lead to higher outstanding receivables. Bad debt expenses are likely to increase because with less emphasis on collections, the likelihood of defaults rises. Collection expenditures decrease because the firm is putting less effort and resources into collecting outstanding debts.

Question 17

Processing float is the delay between the receipt of a check by a payee and its deposit in firm's account.

Accepted Answer

Processing float refers to the time taken between the receipt of a check by a payee and its deposit in the firm's account.

Question 18

If a firm's credit period is increased,the sales volume can be expected to ________,the investment in accounts receivable can be expected to ________,and the bad debt expenses can be expected to ________.
A)increase; decrease; decrease
B)increase; increase; decrease
C)increase; increase; increase
D)decrease; decrease; decrease

Accepted Answer

Increasing a firm's credit period typically leads to an increase in sales volume as more customers are attracted by the more lenient payment terms. This also results in an increase in investment in accounts receivable because the firm has to wait longer to receive payments. Additionally, with longer credit periods, the risk of non-payment or late payment increases, leading to an increase in bad debt expenses.

Question 19

An increase in accounts receivable turnover for a firm due to an increase in collection efforts will ________.
A)decrease the firm's marginal investments in accounts receivable
B)increase the firm's marginal investments in accounts receivable
C)decrease the firm's collection expense
D)increase the firm's bad debt expense

Accepted Answer

An increase in accounts receivable turnover means that the firm is collecting its outstanding receivables more quickly. This would result in a decrease in the average amount of time the firm's funds are tied up in accounts receivable, leading to a decrease in the firm's marginal investments in accounts receivable.

Question 20

Receipts and disbursements management techniques are aimed at minimizing a firm's financing requirements by taking advantage of certain imperfections in the collection and payment system.

Accepted Answer

Receipts and disbursements management techniques involve strategies for optimizing a firm's cash position by managing the timing of collections and payments. By doing so, a firm can reduce its financing requirements, as it can use its cash reserves effectively to cover expenses rather than relying on external financing. This approach takes advantage of certain imperfections in the collection and payment system, such as delays in processing payments or receipts, to improve a firm's cash flow.

Quiz 14: Working Capital and Current Assets Management

If a firm's credit period is decreased,the sales volume can be expected to ,the investment in accounts receivable can be expected to ,and the bad debt expenses can be expected to .

What is the firm's marginal profit contribution from sales under the proposed plan of initiating the cash discount? (See Table 14.7)

What is the marginal investment in accounts receivable under the proposed plan? (See Table 14.7)

An increase in collection efforts by a firm will result in in sales volume, in the investment in accounts receivable, in bad debt expenses,and in collection expenditures.

Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer.

What are the savings of marginal bad debts under the proposed plan? (See Table 14.7)

What is the net result of increasing the cash discount? (See Table 14.7)

Table 14.6 A breakdown of Teffan,Inc.'s outstanding accounts receivable dated June 30,2019 on the basis of the month in which the credit sale was initially made follows.The firm extends 30-day credit terms. -Accounts receivable over 90 days total ________.(See Table 14.6)

Mail float is the delay between the deposit of a check by a payee and the actual availability of the funds.

What is the cost of marginal investment in accounts receivable under the proposed plan? (See Table 14.7)

Assuming that a firm has done all it can to stimulate customers to pay promptly and to select vendors offering the most attractive and flexible credit terms,it can further speed collections and slow disbursements by taking advantage of the "float" existing in the collection and payment systems.

Ashley's Ad Agency's accounts receivable totaled $451,000 on January 30,2019.An aging summary of receivables at this date follows: The firm extends 30-day credit terms to all its credit customers. (a)Prepare an aging schedule for Ashley's Ad Agency. (b)Evaluate the firm's collection performance.

What is the cost of the marginal cash discount? (See Table 14.7)

The entire process resulting from a check issue and mail by a payer company to a payee company (i.e.,mail float,processing float,and clearing float)is disbursement float to the payer company and is collection float to the payee company.

A decrease in collection efforts by a firm will result in in sales volume, in the investment in accounts receivable, in bad debt expenses,and in collection expenditures.

Processing float is the delay between the receipt of a check by a payee and its deposit in firm's account.

If a firm's credit period is increased,the sales volume can be expected to ,the investment in accounts receivable can be expected to ,and the bad debt expenses can be expected to .

An increase in accounts receivable turnover for a firm due to an increase in collection efforts will ________.

Receipts and disbursements management techniques are aimed at minimizing a firm's financing requirements by taking advantage of certain imperfections in the collection and payment system.