Question 1

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

A restrictive short-term financial policy typically involves keeping minimal cash balances and minimizing credit sales to customers in order to avoid excessive debt and maintain a strong financial position. Large investments in marketable securities can also be a component of a restrictive policy to increase liquidity, but liberal credit terms for customers are not typically associated with this approach. Therefore, options I and II are incorrect, while options III and IV align with a restrictive short-term financial policy, making option C the correct answer.

Question 2

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

Accepted Answer

Delaying payments to suppliers means you hold onto your cash longer, reducing the need for external financing.

Question 3

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

The answer of Which of the following actions will tend...

Question 4

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

The answer of An increase in which one of the...

Question 5

Which one of the following will decrease the operating cycle?

Accepted Answer

Collecting accounts receivable faster will decrease the operating cycle since it reduces the time between the sale of a product and the collection of the resulting cash inflow. Paying accounts payable faster, decreasing inventory turnover rate, and increasing accounts payable turnover rate may all have different effects on the operating cycle, but they would not necessarily decrease it. Discontinuing the discount given for early payment of an accounts receivable may have no effect on the operating cycle at all.

Question 6

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

Accepted Answer

The cash cycle measures the amount of time it takes for a firm to convert its investments in inventory and other resources into cash flows from sales. The longer the cycle, the more resources the firm will need to tie up in working capital, and the more likely it will be to require external financing. This is because the longer the cycle, the more money the firm will need to fund its operations before it receives cash from customers. Therefore, statement A is correct. Statements B, C, D, and E are all incorrect. Increasing the accounts payable period will decrease the cash cycle because it will make more cash available to the firm. A negative cash cycle, in which the firm receives cash from customers before it has to pay its suppliers or creditors, is preferable to a positive cash cycle. The cash cycle cannot exceed the operating cycle under any circumstances, and adopting a more liberal accounts receivable policy will tend to increase the cash cycle, not decrease it.

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 the firm is limiting its credit availability and inventory on hand. This can cause a loss of sales due to a lack of inventory, as well as increase the probability of facing a cash-out situation if unexpected expenses arise. It does not necessarily increase the ability of a firm to charge premium prices, and it may actually decrease sales if customers cannot obtain credit or attractive payment terms.

Question 8

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

Accepted Answer

The controller is responsible for overseeing the financial accounting and reporting functions of the organization, including the management of cash flows. They are responsible for ensuring that the organization's financial statements are accurate and comply with accounting principles and regulations.

Question 9

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

Accepted Answer

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

Question 10

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

Accepted Answer

Short-term financial policy refers to the management of a firm's current assets and liabilities. It involves decisions related to the financing of current assets such as inventory, accounts receivables, and cash reserves. Therefore, the short-term financial policy is reflected in both the size of the firm's investment in current assets (option A) and financing of those current assets (option B). Hence, option D is the correct choice. The financing of fixed assets is typically part of the firm's long-term financial policy, and it may not be directly impacted by the short-term financial policy.

Question 11

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

The answer of Which of the following actions will tend...

Question 12

Which one of the following will increase the cash cycle?

Accepted Answer

By paying suppliers earlier to receive the discount they offer, the company will have less cash on hand and will need to wait longer to receive cash from customers, thus increasing the cash cycle.

Question 13

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 14

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

Accepted Answer

The operating cycle is calculated as the sum of the days sales in receivables and the days sales in inventory, minus the number of days payable outstanding. Choices B, C, D, and E will all affect one of these components of the operating cycle, while choice A only affects the payables turnover ratio, which is not included in the operating cycle calculation.

Question 15

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

Accepted Answer

The answer of An increase in which one of the...

Question 16

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 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 accounts receivable policy, including determining credit terms, monitoring customer payments, and taking action on delinquent accounts. The other managers listed have different areas of responsibility within the organization.

Question 18

A restrictive short-term financial policy tends to:

Accepted Answer

A restrictive short-term financial policy is likely to reduce future sales more so than a flexible policy because it limits the ability of customers to purchase on credit. This can lead to decreased sales and revenue in the short term.

Question 19

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 a product when there is an actual order, ABC Manufacturing will decrease the amount of time products spend in inventory and therefore decrease the cash cycle. The operating cycle (the time it takes to convert inventory into cash) may stay the same or decrease, as it depends on the length of the accounts receivable period and accounts payable period, which are not given in the question. The accounts payable period may stay the same or increase if suppliers are paid on delivery instead of on credit, but the accounts receivable period may stay the same or decrease if customers pay faster when they place an order for a specific product. The inventory turnover rate may stay the same or increase if the firm is able to produce and sell more efficiently with a just-in-time production system.

Question 20

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, as it means that the company is taking longer to pay its suppliers.

Quiz 26: Short-Term Finance and Planning

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

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

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

Which one of the following will decrease the operating cycle?

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

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

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

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

Which one of the following will increase the cash cycle?

Flexible short-term financial policies tend to:

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 will decrease the operating cycle?

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

A restrictive short-term financial policy tends to:

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:

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