Question 1

Sydney Hi-Fi offers credit terms of 1/5,net 20.What is the effective annual rate on a $12 000 purchase if you forgo the discount?

Accepted Answer

The answer of Sydney Hi-Fi offers credit terms of 1/5,net...

Question 2

On June 22,Bondi Beachwear purchased $3300 worth of goods.The terms of the sale were 1/7,net 21.What is the effective annual rate of interest for the credit period for this sale?

Accepted Answer

The answer of On June 22,Bondi Beachwear purchased $3300 worth...

Question 3

On May 11,you purchased $3700 of merchandise from a supplier.The terms of the sale were 1/5,net 15.The discounted amount due is _____ which is payable no later than _____.

Accepted Answer

The first step is to calculate the amount of the discount. The terms of 1/5 mean that you can take 1% off the amount due if you pay within 15 days.

Discount = $3700 x 1% = $37

The amount due after the discount is:

Amount due = $3700 - $37 = $3663

Therefore, the discounted amount due is $3663.

The terms also state that the payment is due no later than 15 days, which would be May 26. However, if you take the discount, the payment would be due five days earlier, on May 16.

So, the final answer is D) $3663; May 16.

Question 4

Sydney Surfboards sells 12 000 surfboards a year at an average price per carpet of $499.The carrying cost per unit is $25 and the fixed order costs are $75.What is the economic order quantity assuming there is no safety stock.

Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: EOQ = sqrt((2DS)/H), where D is the demand (12,000), S is the order cost ($75), and H is the holding cost per unit ($25). Plugging in the values, EOQ = sqrt((2*12000*75)/25) = 268.

Question 5

The optimal credit policy will do which one of the following?

Accepted Answer

The optimal credit policy should aim to minimise the total costs of granting credit, which includes both carrying costs and bad debts. While maximising sales and units sold are important considerations, they should not be prioritised at the expense of incurring higher costs.

Question 6

Which one of the following reports will tell me the percentage of accounts receivables that are delinquent by 90 days or more?

Accepted Answer

An aging schedule provides a breakdown of how long a company's accounts receivable balances have been outstanding, allowing you to determine the percentage of overdue receivables, including those that are delinquent by 90 days or more.

Question 7

Which one of the following 5Cs refers to the general economic climate in a customer's line of business?

Accepted Answer

Conditions refer to the general economic climate in a customer's line of business, including factors such as interest rates, inflation rates, and overall stability. The other 5Cs refer to different aspects of a customer's creditworthiness, such as their ability to repay (capacity), their assets available as security (collateral), their reputation and credit history (character), and the amount of funding they need (capital).

Question 8

Australian Coastal Gifts has an average collection period of 18 days and annual sales of $694 000.What is the average investment in accounts receivables as shown on the balance sheet?

Accepted Answer

The answer of Australian Coastal Gifts has an average collection...

Question 9

You purchased an item costing $5700 on July 13.The terms of sale were 1/5,net 20.What is the last day you can pay the discounted price?

Accepted Answer

The terms 1/5, net 20 mean a 1% discount is available if paid within 5 days. July 13 + 5 days = July 18.

Question 10

Which one of the following best illustrates the concept of derived demand?

Accepted Answer

The increased demand for motor vehicles is leading to an increased demand for windshields, illustrating the concept of derived demand. The other options do not directly relate to a change in demand for a specific product or service due to changes in demand for another product or service.

Quiz 17: Working Capital Management