Question 1

All else the same, which of the following would decrease the length of the cash cycle?

Accepted Answer

The answer of All else the same, which of the...

Question 2

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 producing a product only after it receives an actual order, the firm will minimize its inventory holdings and therefore decrease its cash cycle. This is because it will no longer need to tie up cash in holding inventory before making a sale. The other choices are unlikely to be affected by the change in policy.

Question 3

A ﬂoor plan can also be called a(n):

Accepted Answer

A floor plan is a type of secured inventory loan where the inventory itself serves as collateral for the loan.

Question 4

The ﬁnancing of short-term assets with short-term debt is known as:

Accepted Answer

The answer of The ﬁnancing of short-term assets with short-term...

Question 5

The Dawson Brothers have a 60 day collection period. Sales for the next calendar year are estimated at $1,800, $1,300, $2,200 and $2,000, respectively, by quarter starting with the ﬁrst
Quarter of the year. Given this information, which one of the following statements is correct?
Assume a year has 360 days.

Accepted Answer

The accounts receivable balance at the beginning of Quarter 4 will be $1,466.67, calculated based on the 60-day collection period and the sales figures provided.

Question 6

Krista's sells $4,000 worth of goods in December, $2,800 worth in January, $3,200 in February and $3,500 in March. The wholesale cost is 65% of the retail price. The ﬁrm has a receivables period of
30 days, a payables period of 60 days, and buys inventory one month prior to selling it. Which one
Of the following statements is correct?

Accepted Answer

The answer of Krista's sells $4,000 worth of goods in...

Question 7

Which one of the following will decrease the operating cycle?

Accepted Answer

The answer of Which one of the following will decrease...

Question 8

Which one of the following sentences is correct about a manufacturing ﬁrm with seasonal sales?

Accepted Answer

Fixed expenses, such as rent and salaries, typically remain stable regardless of seasonal sales fluctuations.

Question 9

A Vancouver ﬁrm has a cash balance of $12,000 as of June 1. During the month they paid $16,000 on account, $13,000 for wages, and $1,000 for other expense items. The company maintains a
Minimum cash balance of $10,000. Sales for the ﬁrm for April, May, and June are $15,000, $22,000,
And $18,750, respectively. The company collects 40% of sales in the month of sale, 50% in the
Following month, and 10% in the second month following the month of sale. What is the cash surplus
Or deﬁcit as of June 30?

Accepted Answer

The firm starts with $12,000 and pays out $30,000 ($16,000 + $13,000 + $1,000). Cash collected in June is $7,500 (40% of $18,750) + $11,000 (50% of $22,000) + $1,500 (10% of $15,000) = $20,000. Total cash available is $32,000 ($12,000 + $20,000). After payments, the balance is $2,000, which is $8,000 below the minimum required balance of $10,000, resulting in a deficit of $8,000.

Question 10

If a ﬁrm maintains a relatively high level of investments in cash and marketable securities, which of the following statements is true?

Accepted Answer

Maintaining high levels of cash and marketable securities typically means the firm is not investing in higher-return opportunities, thus adding little to shareholder wealth.

Question 11

Holidays, Etc. produces and distributes seasonal merchandise to retail outlets. The ﬁrm has adopted a compromise short-term ﬁnancial policy. Given this information, which one of the following
Statements must be true?

Accepted Answer

A compromise short-term financial policy suggests that the company is using a mix of internal and external financing to meet its short-term funding needs. Therefore, statement A and C are incorrect. The information provided does not give any indication of the debt level or long-term financing needs of the company, so statements D and E cannot be determined. Therefore, the best choice is B, which aligns with the definition of a compromise short-term financial policy.

Question 12

Which of the following statements is true?

Accepted Answer

The operating cycle includes the time it takes to purchase inventory, sell it on credit, and collect payment from customers. The cash cycle includes the operating cycle plus the time it takes to convert receivables into cash. Therefore, the length of the operating cycle is always greater than or equal to the length of the cash cycle. The other statements are not necessarily true.

Question 13

Martinque and Son has a 60 day collection period. Sales for the next calendar year are estimated at $1,200, $1,100, $2,300 and $1,800, respectively, by quarter starting with the ﬁrst quarter of the year.
Given this information, which one of the following statements is correct? Assume that a year has
360 days.

Accepted Answer

The answer of Martinque and Son has a 60 day...

Question 14

Pedro's Farms has $137,000 in net working capital. Which one of the following actions will increase that amount?

Accepted Answer

The answer of Pedro's Farms has $137,000 in net working...

Question 15

Which one of the following will increase net working capital? Assume that the current ratio is greater than 1.0.

Accepted Answer

The answer of Which one of the following will increase...

Question 16

Which one of the following is a source of cash?

Accepted Answer

The answer of Which one of the following is a...

Question 17

Your boss decides that your ﬁrm will switch from a restrictive short-term ﬁnancial policy to a more ﬂexible policy. You should expect to see the ﬁrm's current ratio:

Accepted Answer

A more flexible financial policy allows for a higher investment in current assets and a reduced use of short-term financing, which would lead to a rise in the current ratio.

Question 18

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

Accepted Answer

By delaying payments to suppliers, you retain cash longer, reducing the need for bank financing.

Question 19

The cash cycle is deﬁned as the period of time between the _____ and the _____.

Accepted Answer

The answer of The cash cycle is deﬁned as the...

Question 20

KNF, Inc. pays its creditors in 45 days. Inventory is purchased one quarter prior to its sale. Cost of goods sold is equal to 50% of the selling price. Each quarter the total that KNF must pay on its
Accounts is equal to:

Accepted Answer

The answer of KNF, Inc. pays its creditors in 45...

Quiz 18: Short-Term Finance and Planning

All else the same, which of the following would decrease the length of the cash cycle?

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:

A ﬂoor plan can also be called a(n) :