Question 1

What does a credit policy of "2/10, net 30" mean?
That the selling company offers a 10 percent discount if the customer pays within 2 days. The customer has 30 days to pay the regular price.
That if the buyer pays the net bill within 10 days, a 2 percent discount will be given.
That the selling company offers a 2 percent discount if the customer pays within 10 days. The customer has 30 days to pay the regular price.
That the buyer has two months to pay the bill. If the buyer pays before that time, a 10 percent discount will be given.
None of these are correct.

Accepted Answer

That the selling company offers a 2 percent discount if the customer pays within 10 days. The customer has 30 days to pay the regular price.

Question 2

Jenex Corp. has a credit policy that reads "2/10, net 30." This means that
the company is offering a 10 percent discount if the customer pays within 2 days.
the company will give a net reduction of 30 percent in the amount owed if the customer pays within 10 days.
the customer will have to pay at least 10 percent of the bill by the end of 30 days.
the customer will have to pay at least 30 percent of the bill by the end of 10 days.
none of these.

Accepted Answer

none of these.

Question 3

The business activity that is concerned with determining a firm's long-term investments, obtaining the funds to pay for those investments, and conducting the firm's everyday financial activities is
bookkeeping.
corporate finance.
investment brokers.
chartered banks.
money markets.

Accepted Answer

corporate finance.

Question 4

The "measuring stick" against which performance is evaluated is provided by
a budget.
a cash-flow statement.
a financial plan.
a balance sheet.
debt levels.

Accepted Answer

The answer of The "measuring stick" against which performance is...

Question 5

Which of the following represents the overall objective of financial managers?
To ensure that the company has enough funds on hand to purchase materials needed to produce goods and services
To ensure that the company has enough money to pay for its debts
To increase the supply of money for the economy
To increase the value of the firm and thus to increase shareholder wealth
To manage the firm's cash flow

Accepted Answer

The answer of Which of the following represents the overall...

Question 6

Sellers adjust credit terms in order to influence
when dividends are paid.
when customers pay their bills.
their net profit.
their goods-in-process inventory.
their accounts payable.

Accepted Answer

The answer of Sellers adjust credit terms in order to...

Question 7

Long-term expenditures are usually more carefully planned than short-term outlays because
they represent a binding commitment of company funds that continues long into the future.
they are usually sold at high-profit margins.
they can be used to pay off accounts payable.
the expenditures must finance items that are easily liquidated.
all of these.

Accepted Answer

The answer of Long-term expenditures are usually more carefully planned...

Question 8

Which of the following terms would a firm use to speed up cash flow?
1/10; net 60
1/10; net 30
3/10; net 30
2/10; net 60
2/10; net 30

Accepted Answer

The answer of Which of the following terms would a...

Question 9

Scott is managing a company and he has been advised by his financial manager that his largest source of short-term debt is too high. What source of funding is Scott's financial manager probably talking about?
Inventory loans
Bank notes
Credit cards
Commercial paper
Accounts payable

Accepted Answer

The answer of Scott is managing a company and he...

Question 10

Why is it necessary for a business firm to establish a credit policy?
A credit policy is necessary to determine how much money the business can borrow to purchase supplies.
A credit policy is necessary to determine how dividends will be distributed to the shareholders.
A credit policy is necessary to determine which suppliers the firm needs to pay.
A credit policy is a means of accounting for the dollar value of inventory-in-process.
A credit policy provides financial managers with expected dates of payment from buyers of the firm's products and services.

Accepted Answer

The answer of Why is it necessary for a business...

Question 11

Sally is looking at an invoice dated July 1st for $1000 that has terms of 2/10; net 30. If she pays the bill on July 3rd how much should she write the cheque for?
$900
$980
$998
$1000
$700

Accepted Answer

The answer of Sally is looking at an invoice dated...

Question 12

David is looking at a bill for supplies his company bought. It is dated May 1st and the terms are 2/10; net 30. In order to pay the least amount, when should he pay the bill?
Any day in May
May 10
May 21
May 31
May 15

Accepted Answer

The answer of David is looking at a bill for...

Question 13

Tony is responsible for planning and controlling the acquisition and dispersal of the company's financial assets. What is Tony's job title?
Management information systems manager
Financial manager
Purchasing manager
Accounting manager
Chief risk manager

Accepted Answer

The answer of Tony is responsible for planning and controlling...

Question 14

When a firm ensures that it always has enough funds on hand to purchase the materials and human resources that it needs to produce goods and services, it is exercising
cash-flow management.
government tax reporting.
accounting.
financial planning.
financial control.

Accepted Answer

The answer of When a firm ensures that it always...

Question 15

Henry has received notice from a supplier that all invoices must be paid within 30 days rather than 60 days as previously given. Which of the following will be impacted by this change?
Inventories
Raw materials inventory
Accounts receivable
Capital expenditures
Cash flow

Accepted Answer

The answer of Henry has received notice from a supplier...

Question 16

All of the following are responsibilities of the financial manager except
determining a firm's long-term investments.
obtaining funds to pay for those investments.
developing the firm's financial statements.
conducting the firm's everyday financial activities.
managing the risks that the firm takes.

Accepted Answer

The answer of All of the following are responsibilities of...

Question 17

In 2012, Canadian Pacific Railway Ltd. announced that it would make investments totaling $1.2 billion in order to improve its operating ratio, which in 2011 was the worst among North America's Big Six railways. This activity is CPR's
cash flow management plan.
financial plan.
leveraging.
budget.
financial control.

Accepted Answer

The answer of In 2012, Canadian Pacific Railway Ltd. announced...

Question 18

Scott has been informed by his financial manager that his accounts receivable are being paid much too late. To fix this problem, Scott should
develop a credit policy.
call the companies and request the funds.
charge higher interest rates.
demand that the money be paid.
sell the late accounts to collection agents.

Accepted Answer

The answer of Scott has been informed by his financial...

Question 19

A credit policy of "2/10, net 30" means
That if a customer pays its bill within 10 days, it will receive a 30 percent discount.
That if a customer pays its bill within 30 days, it will receive a 10 percent discount.
That if a customer pays its bill within 2 days, it will receive a 10 percent discount.
That if a customer pays its bill within 10 days, it will receive a 2 percent discount.
None of these are correct.

Accepted Answer

The answer of A credit policy of "2/10, net 30"...

Question 20

When managers at Kraft Foods anticipate how much cheddar cheese Safeway supermarkets will buy each month and when Safeway will pay for those purchases, Kraft is managing its
accounts payable.
accounts receivable.
credit policies.
capital expenditures.
inventories.

Accepted Answer

The answer of When managers at Kraft Foods anticipate how...

Quiz 15: Financial Decisions and Risk Management

The business activity that is concerned with determining a firm's long-term investments, obtaining the funds to pay for those investments, and conducting the firm's everyday financial activities is bookkeeping. corporate finance. investment brokers. chartered banks. money markets.

The "measuring stick" against which performance is evaluated is provided by a budget. a cash-flow statement. a financial plan. a balance sheet. debt levels.

Sellers adjust credit terms in order to influence when dividends are paid. when customers pay their bills. their net profit. their goods-in-process inventory. their accounts payable.

Which of the following terms would a firm use to speed up cash flow? 1/10; net 60 1/10; net 30 3/10; net 30 2/10; net 60 2/10; net 30

Scott is managing a company and he has been advised by his financial manager that his largest source of short-term debt is too high. What source of funding is Scott's financial manager probably talking about? Inventory loans Bank notes Credit cards Commercial paper Accounts payable

Sally is looking at an invoice dated July 1st for $1000 that has terms of 2/10; net 30. If she pays the bill on July 3rd how much should she write the cheque for? $900 $980 $998 $1000 $700

David is looking at a bill for supplies his company bought. It is dated May 1st and the terms are 2/10; net 30. In order to pay the least amount, when should he pay the bill? Any day in May May 10 May 21 May 31 May 15

Tony is responsible for planning and controlling the acquisition and dispersal of the company's financial assets. What is Tony's job title? Management information systems manager Financial manager Purchasing manager Accounting manager Chief risk manager

When a firm ensures that it always has enough funds on hand to purchase the materials and human resources that it needs to produce goods and services, it is exercising cash-flow management. government tax reporting. accounting. financial planning. financial control.

Henry has received notice from a supplier that all invoices must be paid within 30 days rather than 60 days as previously given. Which of the following will be impacted by this change? Inventories Raw materials inventory Accounts receivable Capital expenditures Cash flow

When managers at Kraft Foods anticipate how much cheddar cheese Safeway supermarkets will buy each month and when Safeway will pay for those purchases, Kraft is managing its accounts payable. accounts receivable. credit policies. capital expenditures. inventories.