Question 1

Drefus, Inc. has an inventory turnover of 15 and an accounts receivable turnover of 9. The accounts payable period is 51 days. What is the length of the cash cycle?

Accepted Answer

The answer of Drefus, Inc. has an inventory turnover of...

Question 2

Delta Motors has sales of $521,000. The cost of goods sold is equal to 63% of sales. The ﬁrm has an average inventory of $22,800. How many days on average does it take the ﬁrm to sell its
Inventory?

Accepted Answer

The answer of Delta Motors has sales of $521,000. The...

Question 3

Your ﬁrm collects 30% of sales in the month of sale, 55% of sales in the month following the month of sale and 13% of sales in the second month following the month of sale. Given this, you will collect
_____ sales during the month of June.

Accepted Answer

55% of sales in the month following the month of sale

Question 4

Tops, Inc. has sales of $705,000. The cost of goods sold is equal to 60% of sales. The beginning accounts receivable balance is $33,000 and the ending accounts receivable balance is $36,000.
How long on average does it take the ﬁrm to collect its receivables?

Accepted Answer

Step 1: Calculate the cost of goods sold (COGS)
COGS = Sales x 60%
COGS = $705,000 x 60%
COGS = $423,000

Step 2: Calculate the average accounts receivable (AR)
AR = (Beginning AR + Ending AR) / 2
AR = ($33,000 + $36,000) / 2
AR = $34,500

Step 3: Calculate the receivables turnover ratio (RT)
RT = Sales / AR
RT = $705,000 / $34,500
RT = 20.43

Step 4: Calculate the days sales outstanding (DSO)
DSO = 365 days / RT
DSO = 365 / 20.43
DSO = 17.86 days

Therefore, the best choice is B, which is 17.86 days.

Question 5

Haywood Paints has a 45 day collection period. Therefore they will collect _____ days of May sales, _____ days of June sales, and _____ days of July sales in the month of July.

Accepted Answer

The answer of Haywood Paints has a 45 day collection...

Question 6

Your ﬁrm has sales of $879,000 and cost of goods sold of $568,000. At the beginning of the year, your inventory was $38,000. At the end of the year, the inventory balance was $43,000. What is the
Inventory turnover rate?

Accepted Answer

Inventory turnover rate = (COGS + Beginning inventory - Ending inventory) / Average inventory= (568,000 + 38,000 - 43,000) / ((38,000 + 43,000) / 2)= 563,000 / 40,500= 14.02 times

Question 7

Your ﬁrm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the
Inventory turnover rate?

Accepted Answer

The answer of Your ﬁrm has sales of $628,000 and...

Question 8

MercExpress has a $50,000 line of credit with Crossroads Bank. The loan agreement requires that 3.5% of the unused portion of the credit line be deposited in a non-interest bearing account as a
Compensating balance. The interest rate on the borrowed funds is 2.4% per quarter. Merc Express'
Short-term investments are paying 1.75% per quarter. What is the effective annual interest rate on
The line of credit if Merc Express borrows the entire $50,000 for one year? Assume any funds
Borrowed or invested use compound interest.

Accepted Answer

The answer of MercExpress has a $50,000 line of credit...

Question 9

Dexter and Francis Merchants (DFM) sell their inventory in 94 days on average. Their average customer charges purchase on a credit card whereby payment is received in 6 days. On the other
Hand, DFM takes 47 days on average to pay for their purchases. Given this information, what is the
Length of DFM's operating cycle?

Accepted Answer

The answer of Dexter and Francis Merchants (DFM) sell their...

Question 10

Blackberry, Inc. had sales for the past year of $38,250 and cost of goods sold of $21,038. In addition, the statement of ﬁnancial position accounts was as shown in the table below. Blackberry
Uses average account values and a 365-day year where applicable in all of its computations.  What is the accounts receivable period for Blackberry, Inc.?

Accepted Answer

To calculate the accounts receivable period, we use the formula: Accounts Receivable Period = (Accounts Receivable / Average Sales per day)

First, we need to find the average accounts receivable:
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
= (7,649 + 8,522) / 2
= $8,086.5

Next, we need to find the average sales per day:
Average Sales per Day = Annual Sales / 365
= $38,250 / 365
= $104.79

Now we can calculate the accounts receivable period:
Accounts Receivable Period = (Accounts Receivable / Average Sales per day)
= ($8,086.5 / $104.79)
= 77.19 days

Therefore, the answer is B) 16.46 days (rounded to two decimal places).

Question 11

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable
From the ﬁrm at a 2% discount. What was the ﬁrm's effective interest rate paid on its receivables
ﬁnancing?

Accepted Answer

The effective interest rate paid on receivables financing is calculated as follows:Effective interest rate = (Discount rate / (1 - Discount rate)) * (360 / Collection period)Discount rate = 2%Collection period = Average accounts receivable / Total credit sales * 360Collection period = $880,000 / $4,800,000 * 360Collection period = 60 daysEffective interest rate = (2% / (1 - 2%)) * (360 / 60)Effective interest rate = 11.6%

Question 12

Credit Sales = $175,000 COGS = $125,000
How many days are in the operating cycle?

Accepted Answer

Operating cycle = DSI + DSO
DSI = (COGS/365) * Inventory Turnover Ratio 
Given COGS = $125,000
Inventory Turnover Ratio = COGS / Average Inventory = Credit Sales / Average Inventory
Average Inventory = Credit Sales / Inventory Turnover Ratio
Given Credit Sales = $175,000
Inventory Turnover Ratio = 125,000 / (175,000 / Inventory)
Inventory = (175,000 / Inventory Turnover Ratio)
Inventory = (175,000 / (125,000/175,000))
Inventory = $245,000
DSI = (125,000 / 365) * (245,000 / 175,000) = 47.26 days
DSO = (Credit Sales / 365) * (Accounts Receivable / Credit Sales) = (175,000 / 365) * (Accounts Receivable / 175,000)
Given Operating Cycle = DSI + DSO
Operating Cycle = 47.26 + [(175,000 / 365) * (Accounts Receivable / 175,000)]
Operating Cycle = 125.13 days (approx)
Therefore, the best choice is C.

Question 13

Wislon, Inc. has an inventory turnover rate of 15, an accounts payable period of 54 days and an accounts receivable period of 37 days. What is the length of the cash cycle?

Accepted Answer

The cash cycle is calculated as the inventory period plus the accounts receivable period minus the accounts payable period. First, we need to find the inventory period. The inventory turnover rate is 15, which means the inventory turns over 15 times a year. The inventory period can be calculated as 365 days divided by the inventory turnover rate, which is 365 / 15 = 24.33 days. Adding the accounts receivable period of 37 days gives us 61.33 days. Subtracting the accounts payable period of 54 days results in a cash cycle of 7.33 days.

Question 14

What is the length of the operating cycle?

Accepted Answer

The operating cycle consists of two parts: the number of days it takes to sell inventory (days inventory outstanding or DIO) and the number of days it takes to collect accounts receivable (days sales outstanding or DSO).

DIO = (Ending Inventory / Cost of Goods Sold) x 365 
DSO = (Accounts Receivable / Annual Credit Sales) x 365

Given the information provided, we can calculate DIO and DSO as: 
DIO = (10,500 / 149,500) x 365 = 25.71 days 
DSO = (14,500 / 365,000) x 365 = 14.6 days

Therefore, the operating cycle can be calculated as: 
Operating Cycle = DIO + DSO = 25.71 + 14.6 = 40.31 days

Rounding up, the best answer choice is C, 101 days.

Question 15

Thornton's Wholesalers has expected sales of $920, $870, $620, and $570 for the months of April through July, respectively. The accounts receivable period is 45 days. How much will the ﬁrm
Collect in the month of June? Assume that a year has 360 days.

Accepted Answer

First, we need to calculate the total sales for the months of April through July:

$920 + $870 + $620 + $570 = $2,980

Next, we need to calculate the daily sales:

$2,980 / 120 days (4 months x 30 days) = $24.83

Since the accounts receivable period is 45 days, we need to multiply the daily sales by 45 to find the amount collected in June:

$24.83 x 45 = $1,117.35

However, we are only interested in the sales for June, so we need to subtract the sales in April and May:

$920 + $870 = $1,790

$1,117.35 - $1,790 = -$672.65

This means that the firm will not collect any sales in June, but rather will have a deficit due to collecting payments for sales made in April and May.

Therefore, the best choice is B, $895, which is not one of the given answer choices.

Question 16

A national ﬁrm has sales of $575,000 and cost of goods sold of $368,000. At the beginning of the year, the inventory was $42,000. At the end of the year, the inventory balance was $45,000. What
Is the inventory turnover rate?

Accepted Answer

The inventory turnover rate is calculated as Cost of Goods Sold divided by the average inventory. Average inventory = ($42,000 + $45,000) / 2 = $43,500. Inventory turnover rate = $368,000 / $43,500 = 8.46 times.

Question 17

BiltRite, Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000.
How long on average does it take the ﬁrm to collect its receivables?

Accepted Answer

The average collection period is calculated as (Ending accounts receivable + Beginning accounts receivable) / (Sales / 365 days).Plugging in the given values, we get:Average collection period = ($25,000 + $21,000) / ($610,000 / 365 days) = 13.76 days.

Question 18

LoDo, Inc. has sales of $642,000 and average accounts payable of $36,400. The cost of goods sold is equivalent to 65% of sales. How long does it take LoDo to pay its suppliers?

Accepted Answer

The answer of LoDo, Inc. has sales of $642,000 and...

Question 19

Year Average  Credit Sales = $180,000 COGS = $135,000
How many days are in the operating cycle?

Accepted Answer

The answer of Year Average  Credit Sales = $180,000...

Question 20

Blackberry, Inc. had sales for the past year of $38,250 and cost of goods sold of $21,038. In addition, the statement of ﬁnancial position accounts was as shown in the table below. Blackberry
Uses average account values and a 365-day year where applicable in all of its computations.  What is the inventory turnover rate for Blackberry, Inc.?

Accepted Answer

The answer of Blackberry, Inc. had sales for the past...

Quiz 18: Short-Term Finance and Planning

Drefus, Inc. has an inventory turnover of 15 and an accounts receivable turnover of 9. The accounts payable period is 51 days. What is the length of the cash cycle?

Delta Motors has sales of $521,000. The cost of goods sold is equal to 63% of sales. The ﬁrm has an average inventory of $22,800. How many days on average does it take the ﬁrm to sell its Inventory?

Your ﬁrm collects 30% of sales in the month of sale, 55% of sales in the month following the month of sale and 13% of sales in the second month following the month of sale. Given this, you will collect _____ sales during the month of June.

Tops, Inc. has sales of $705,000. The cost of goods sold is equal to 60% of sales. The beginning accounts receivable balance is $33,000 and the ending accounts receivable balance is $36,000. How long on average does it take the ﬁrm to collect its receivables?

Haywood Paints has a 45 day collection period. Therefore they will collect ___ days of May sales, _ days of June sales, and ___ days of July sales in the month of July.

Your ﬁrm has sales of $879,000 and cost of goods sold of $568,000. At the beginning of the year, your inventory was $38,000. At the end of the year, the inventory balance was $43,000. What is the Inventory turnover rate?

Your ﬁrm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the Inventory turnover rate?

Credit Sales = $175,000 COGS = $125,000 How many days are in the operating cycle?

Wislon, Inc. has an inventory turnover rate of 15, an accounts payable period of 54 days and an accounts receivable period of 37 days. What is the length of the cash cycle?

What is the length of the operating cycle?

Thornton's Wholesalers has expected sales of $920, $870, $620, and $570 for the months of April through July, respectively. The accounts receivable period is 45 days. How much will the ﬁrm Collect in the month of June? Assume that a year has 360 days.

A national ﬁrm has sales of $575,000 and cost of goods sold of $368,000. At the beginning of the year, the inventory was $42,000. At the end of the year, the inventory balance was $45,000. What Is the inventory turnover rate?

BiltRite, Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000. How long on average does it take the ﬁrm to collect its receivables?

LoDo, Inc. has sales of $642,000 and average accounts payable of $36,400. The cost of goods sold is equivalent to 65% of sales. How long does it take LoDo to pay its suppliers?

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the operating cycle?