Question 1

A. What is the cash cycle for White Bluffs, Inc. if all sales are credit sales.
B. If you knew that Accounts Payables were $4884 last year, what effect would this have on your estimate of the cash cycle. Show and explain why.

Accepted Answer

The answer of A. What is the cash cycle for...

Question 2

A firm borrows $7 million through a credit line and is required to keep $350,000 as a compensating balance. The credit line carries a 11% interest rate. Calculate the effective interest rate on the loan if it is repaid after 1 year.

Accepted Answer

The answer of A firm borrows $7 million through a...

Question 3

It has been argued that if one could perfectly synchronize a firm's cash inflows and outflows, short-term financial planning would be unnecessary. Do you agree? What actions can the firm's financial decision-makers take to reduce the degree of asynchronization? Why should this be a concern?

Accepted Answer

The answer of It has been argued that if one...

Question 4

Sales for the Popson Pool Company for 1999 are forecasted at $7 million in the 1^st quarter, $9 million in the 2^nd quarter, $11 million in the 3^rd quarter, and $5 million in quarter 4. All sales are for credit, and Popson has a 90-day (i.e., 1 quarter) collection period such that 100% of sales are collected in the following quarter. Assume sales from the 4^th quarter of 1998 at $1 million. Calculate Popson's ending receivables balance for the 4^th quarter of 1999.

Accepted Answer

The answer of Sales for the Popson Pool Company for...

Question 5

In a loan arranged through the assignment of accounts receivable the lender:
A) accepts the actual receivable to be collected.
B) has a lien on the receivables and recourse to the borrower.
C) assumes full risk of default.
D) all of the above.

Accepted Answer

In a loan arranged through the assignment of accounts receivable, the lender has a lien on the receivables and recourse to the borrower. This means that if the borrower defaults, the lender can go after the borrower to collect the unpaid receivables. However, the lender does not necessarily accept the actual receivables to be collected, and they do not assume full risk of default.

Question 6

A firm that is buying something from a supplier may effectively arrange for the bank to pay the outstanding bill using a:
A) banker's acceptance.
B) certificate of deposit.
C) commercial paper.
D) forward option.
E) letter of payment.

Accepted Answer

A banker's acceptance is a time draft that is guaranteed by a bank, making it a secure payment option for the supplier. This allows the firm to effectively arrange for the bank to pay the outstanding bill. Certificate of deposit, commercial paper, forward option, and letter of payment are not typically used in this type of transaction.

Question 7

. What is the operating cycle for White Bluffs, Inc. if all sales are on credit?
B. If you knew that Accounts Receivables were $3,250 the prior year, what effect would this have on your estimate of the operating cycle. Show and explain why.

Accepted Answer

The answer of . What is the operating cycle for...

Question 8

The Soppy's Pool Company forecasts total cash receipts in 1998 at $9 million in the 1^st quarter, $11 million in the 2^nd quarter, $3 million in the 3^rd quarter, and $2 million in the 4^th quarter. Cash disbursements are forecasted at $4 million in quarter 1, $7 million in quarter 2, $7 million in quarter 3, and $2 million in quarter 4. Soppy's establishes a minimum cash balance of $5 million to facilitate transactions. Calculate Soppy's cumulative finance surplus or deficit over each quarter in 1998.

Accepted Answer

The answer of The Soppy's Pool Company forecasts total cash...

Quiz 27: Short-Term Finance and Planning

A. What is the cash cycle for White Bluffs, Inc. if all sales are credit sales. B. If you knew that Accounts Payables were $4884 last year, what effect would this have on your estimate of the cash cycle. Show and explain why.

A firm borrows $7 million through a credit line and is required to keep $350,000 as a compensating balance. The credit line carries a 11% interest rate. Calculate the effective interest rate on the loan if it is repaid after 1 year.

It has been argued that if one could perfectly synchronize a firm's cash inflows and outflows, short-term financial planning would be unnecessary. Do you agree? What actions can the firm's financial decision-makers take to reduce the degree of asynchronization? Why should this be a concern?

In a loan arranged through the assignment of accounts receivable the lender:

A firm that is buying something from a supplier may effectively arrange for the bank to pay the outstanding bill using a:

. What is the operating cycle for White Bluffs, Inc. if all sales are on credit? B. If you knew that Accounts Receivables were $3,250 the prior year, what effect would this have on your estimate of the operating cycle. Show and explain why.