Question 1

Computerized financial planning models may be classified as any of the following except:

Accepted Answer

A)  deterministic
B)  optimistic
C)  probabilistic
D)  none of theseE) B) and D)
F) None of the above

Question 2

In examining the term structure of interest rates, the interest rates of have exceeded short-term rates.

Accepted Answer

A)  Commercial paper
B)  Notes payable
C)  Corporate bonds
D)  Marketable securitiesE) B) and C)
F) C) and D)

Question 3

A firm's cash conversion cycle is equal to its operating cycle minus its .

Accepted Answer

A)  inventory conversion period
B)  receivables conversion period
C)  payables deferral period
D)  none of theseE) A) and B)
F) All of the above

Question 4

A firm's operating cycle is equal to its:

Accepted Answer

A)  Only statement I is correct.
B)  Only statement II is correct
C)  Both statements I and II are correct.
D)  Neither statement I nor II is correct.E) None of the above
F) All of the above

Question 5

The size of a firm's investment in current assets is a function of all of the following factors except

Accepted Answer

A)  sales level
B)  inventory policies
C)  credit policies
D)  stockholders equityE) C) and D)
F) A) and B)

Question 6

With the matching approach to meeting the financing needs of the firm, fixed and permanent current assets are financed with

Accepted Answer

A)  long-term debt only
B)  equity funds only
C)  both long-term debt and equity funds
D)  neither long-term debt nor equity fundsE) A) and C)
F) A) and B)

Question 7

All other things being equal, a policy of holding a relatively proportion of the firm's total assets in the form of current assets will tend to result in a expected profitability or rate of return on the total assets of the firm.

Accepted Answer

A)  large, higher
B)  small, higher
C)  constant, higher
D)  constant, lowerE) B) and C)
F) None of the above

Question 8

Net working capital is:

Accepted Answer

A)  the difference between the company's current assets and current liabilities.
B)  the difference between the company's current assets and fixed assets.
C)  the sum of the firm's current assets plus the firm's current liabilities
D)  the firm's fixed assets plus the firm's long-term liabilities.E) A) and B)
F) All of the above

Question 9

The size and nature of a firm's investment in current assets is a function of a number of different factors including all of the following except

Accepted Answer

A)  how efficient the firm manages its fixed assets
B)  the length of the operating cycle
C)  the sales level
D)  credit policiesE) B) and D)
F) B) and C)

Question 10

The optimal level of working capital investment is the level that is expected to

Accepted Answer

A)  maximize return on total assets
B)  maximize earnings per share
C)  maximize shareholder wealth
D)  minimize interest expensesE) A) and D)
F) A) and C) C

Question 11

Explain trade credit.

Accepted Answer

Trade credit is an important source of s...

Question 12

A firm's net working capital position is a widely used measure of its .

Accepted Answer

A)  leverage
B)  profitability
C)  risk
D)  none of theseE) C) and D)
F) All of the above

Question 13

Last year Bizmart had credit sales of $32 million and a net profit margin of 8%.If Bizmart had accounts receivable of $4.5 million, what was the length of the receivables conversion period?

Accepted Answer

A)  51.3 days
B)  56.3 days
C)  54.9 days
D)  47.2 daysE) All of the above
F) C) and D)

Question 14

The assets are those that are affected by the seasonal or cyclical nature of company sales.

Accepted Answer

A)  current
B)  permanent current
C)  fluctuating current
D)  none of theseE) A) and B)
F) B) and D) C

Question 15

What is the inventory conversion period for O'Brian's if it has sales of $320,000, an average inventory of $5,333, and a cash conversion cycle of 20 days? Assume that the cost of sales is 55 percent of sales.

Accepted Answer

A)  6 days
B)  11 days
C)  13.5 days
D)  15 daysE) A) and B)
F) A) and C)

Question 16

The shows the time interval over which additional non-spontaneous sources of working capital financing must be obtained to carry out the firm's activities.

Accepted Answer

A)  inventory conversion period
B)  cash conversion cycle
C)  payables deferral period
D)  receivables conversion periodE) C) and D)
F) B) and D)

Question 17

Tefft Industries has an average inventory of $170,000, sells on terms of 2/10, net 30, and its cost of sales is $540,000.What is Tefft's inventory conversion period?

Accepted Answer

A)  85 days
B)  115 days
C)  105 days
D)  cannot be determined from the data givenE) A) and B)
F) All of the above B

Question 18

The length of the operating cycle is equal to the length of the

Accepted Answer

A)  Only statement I is correct.
B)  Only statement II is correct.
C)  Both statements I and II are correct.
D)  Neither statement I nor II is correct.E) A) and D)
F) A) and B)

Question 19

Negotiated short-term credit sources are all of the following EXCEPT:

Accepted Answer

A)  commerical paper
B)  inventory loans
C)  trade credit
D)  bank creditE) All of the above
F) C) and D)

Question 20

Which of the following working capital financing policies subjects the firm to the greatest risk?

Accepted Answer

A)  financing fluctuating current assets with long-term debt
B)  financing permanent current assets with long-term debt
C)  financing permanent current assets with short-term debt
D)  financing fluctuating current assets with short-term debtE) A) and B)
F) A) and C)

Exam 16: Working Capital Management

Computerized financial planning models may be classified as any of the following except:

Correct AnswerverifiedShow Answer

In examining the term structure of interest rates, the interest rates of have exceeded short-term rates.

Correct AnswerverifiedShow Answer

A firm's cash conversion cycle is equal to its operating cycle minus its .

Correct AnswerverifiedShow Answer

A firm's operating cycle is equal to its:

Correct AnswerverifiedShow Answer

The size of a firm's investment in current assets is a function of all of the following factors except

Correct AnswerverifiedShow Answer

With the matching approach to meeting the financing needs of the firm, fixed and permanent current assets are financed with

Correct AnswerverifiedShow Answer

All other things being equal, a policy of holding a relatively proportion of the firm's total assets in the form of current assets will tend to result in a expected profitability or rate of return on the total assets of the firm.

Correct AnswerverifiedShow Answer

Net working capital is:

Correct AnswerverifiedShow Answer

The size and nature of a firm's investment in current assets is a function of a number of different factors including all of the following except

Correct AnswerverifiedShow Answer

The optimal level of working capital investment is the level that is expected to

Correct AnswerverifiedC

Explain trade credit.

Correct AnswerverifiedTrade credit is an important source of s...View AnswerShow Answer

A firm's net working capital position is a widely used measure of its .

Correct AnswerverifiedShow Answer

Last year Bizmart had credit sales of $32 million and a net profit margin of 8%.If Bizmart had accounts receivable of $4.5 million, what was the length of the receivables conversion period?

Correct AnswerverifiedShow Answer

The assets are those that are affected by the seasonal or cyclical nature of company sales.

Correct AnswerverifiedC

What is the inventory conversion period for O'Brian's if it has sales of $320,000, an average inventory of $5,333, and a cash conversion cycle of 20 days? Assume that the cost of sales is 55 percent of sales.

Correct AnswerverifiedShow Answer

The shows the time interval over which additional non-spontaneous sources of working capital financing must be obtained to carry out the firm's activities.

Correct AnswerverifiedShow Answer

Tefft Industries has an average inventory of $170,000, sells on terms of 2/10, net 30, and its cost of sales is $540,000.What is Tefft's inventory conversion period?

Correct AnswerverifiedB

The length of the operating cycle is equal to the length of the

Correct AnswerverifiedShow Answer

Negotiated short-term credit sources are all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Which of the following working capital financing policies subjects the firm to the greatest risk?

Correct AnswerverifiedShow Answer

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C

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Trade credit is an important source of s...
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C

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B

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