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finance data bank




Question;Which of the following statements is;most correct?;a. Under normal conditions the shape of the yield curve implies that the;interest cost of short-term debt is greater than that of long-term debt;although short-term debt has other advantages that make it desirable as a;financing source.;b. Flexibility is an advantage of short-term credit but this is somewhat offset;by the higher flotation costs associated with the need to repeatedly renew;short-term credit.;c. A short-term loan can usually be obtained more quickly than a long-term loan;but the penalty for early repayment of a short-term loan is significantly;higher than for a long-term loan.;d. Statements about the flexibility, cost, and riskiness of short-term versus;long-term credit are dependent on the type of credit that is actually used.;e. Short-term debt is often less costly than long-term debt and the major reason;for this is that short-term debt exposes the borrowing firm to much less risk;than long-term debt..;???;Spartan Sporting Goods has $5 million;in inventory and $2 million in accounts receivable. Its;average daily sales are $100,000. The company's payables deferral period;(accounts payable divided;by daily purchases) is 30 days. What is the length of the company's cash;conversion cycle?;a. 100 days;b. 60 days;c. 50 days;d. 40 days;e. 33 days;For the Cook County Company, the;average age of accounts receivable is 60 days, the average age of accounts;payable is 45 days, and the average age of inventory is 72 days. Assuming a;365-day year, what is the length of the firm's cash conversion cycle?;a. 87 days;b. 90 days;c. 65 days;d. 48 days;e. 66 day;The Danser Company expects to have;sales of $30,000 in January, $33,000 in February, and $38,000 in March. If 20;percent of sales are for cash, 40 percent are credit sales paid in the month;following the sale, and 40 percent are credit sales paid 2 months following the;sale, what are the cash receipts from sales in March?;a. $55,000;b. $47,400;c. $38,000;d. $32,800;e. $30,000;Jumpdisk Company writes checks;averaging $15,000 a day, and it takes 5 days for these;checks to clear. The firm also receives checks in the amount of $17,000 per;day, but the;firm loses three days while its receipts are being deposited and cleared. What;is the;firm's net float in dollars?;a. $126,000;b. $ 75,000;c. $ 32,000;d. $ 24,000;e. $ 16,000;Bowa Construction's days sales outstanding;is 50 days (on a 365-day basis). The company's;accounts receivable equal $100 million and its balance sheet shows inventory;equal to $125;million. What is the company's inventory turnover ratio?;a. 5.84;b. 4.25;c. 3.33;d. 2.75;e. 7.25;If Hot Tubs Inc. had sales of;$2,027,773 per year (all credit) and its days sales;outstanding was equal to 35 days, what was its average amount of accounts;receivable;outstanding? (Assume a 365-day year.);a. $194,444;b. $ 57,143;c. $ 5,556;d. $ 97,222;e. $212,541;A firm is offered trade credit terms of;3/15, net 45 days. The firm does not take the;discount, and it pays after 67 days. What is the nominal annual cost of not;taking the;discount? (Assume a 365-day year.);a. 21.71%;b. 22.07%;c. 22.95%;d. 23.48%;e. 24.52%;a. 21.71%;???;Dixie Tours Inc. buys on terms of 2/15;net 30 days. It does not take discounts, and it;typically pays 35 days after the invoice date. Net purchases amount to $720,000;per year.;What is the nominal annual cost of its non-free trade credit? (Assume a 365-day;year.);a. 17.2%;b. 23.6%;c. 26.1%;d. 37.2%;e. 50.6%;Your company has been offered credit;terms on its purchases of 4/30, net 90 days. What will;be the nominal annual cost of trade credit if your company pays on the 35th day;after;receiving the invoice? (Assume a 365-day year.);a. 30%;b. 304%;c. 3%;d. 87%;e. 156%;Phillips Glass Company buys on terms of;2/15, net 30 days. It does not take discounts, and it;typically pays 30 days after the invoice date. Net purchases amount to $730,000;per year.;On average, how much "free" trade credit does Phillips receive during;the year? (Assume a;365-day year.);a. $30,000;b. $40,000;c. $50,000;d. $60,000;e. $70,000;Wildthing Amusement Company's total;assets fluctuate between $320,000 and $410,000;while its fixed assets remain constant at $260,000. If the firm follows a;maturity;matching or moderate working capital financing policy, what is the likely level;of its;long-term financing?;a. $ 90,000;b. $260,000;c. $350,000;d. $410,000;e. $320,000;Inland Oil arranged a $10,000,000;revolving credit agreement with a group of small banks. The firm paid an annual;commitment fee of one-half of one percent of the unused balance of the loan;commitment. On the used portion of the loan, Inland paid 1.5 percent above;prime for the funds actually borrowed on an annual, simple interest basis.;The;prime rate was at 9 percent for the year. If Inland borrowed $6,000,000;immediately after the agreement was signed and repaid the loan at the end of;one year, what was the total dollar cost of the loan agreement for one year?;a. $560,000;b. $650,000;c. $540,000;d. $900,000;e. $675,000;On average, a firm sells $2,000,000 in;merchandise a month. It keeps inventory equal to one-half of its monthly sales;on hand at all times. If the firm analyzes its accounts using a 365-day year;what is the firm's inventory conversion period?;a. 365.0 days;b. 182.5 days;c. 30.3 days;d. 15.2 days;e. 10.5 days;Porta Stadium Inc. has annual sales of;$80,000,000 and keeps average inventory of $20,000,000. On average, the firm;has accounts receivable of $16,000,000. The firm buys all raw materials on;credit, its trade credit terms are net 35 days, and it pays on time. The firm's;managers are searching for ways to shorten the cash conversion cycle. If sales;can be maintained at existing levels but inventory can be lowered by $4,000,000;and;accounts receivable lowered by $2,000,000, what will be the net change in the;cash conversion cycle? Use a 365-day year. Round to the closest whole day.;a. +105 days;b. -105 days;c. +27 days;d. -27 days;e. -3 days;You have recently been hired to improve;the performance of Multiplex Corporation, which has been experiencing a severe;cash shortage. As one part of your analysis, you want to determine the firm's;cash conversion cycle. Using the following information and a 365-day year, what;is your estimate of the firm's current cash conversion cycle?;?;Current inventory = $120,000.;?;Annual sales = $600,000.;?;Accounts receivable = $157,808.;?;Accounts payable = $25,000.;?;Total annual purchases = $365,000.;?;Purchases credit terms: net 30 days.;?;Receivables credit terms: net 50 days.;a. 49 days;b. 193 days;c. 100 days;d. 168 days;e. 144 days;Kolan Inc. has annual sales of;$36,500,000 ($100,000 a day on a 365-day basis). On average, the company has;$12,000,000 in inventory and $8,000,000 in accounts receivable. The company is;looking for ways to shorten its cash conversion cycle, which is calculated on a;365-day basis. Its CFO has proposed new policies that would result in;a 20 percent reduction in both average inventories and accounts receivables.;The company anticipates that these policies will also reduce sales by 10;percent. Accounts payable will remain unchanged. What effect would these;policies have on the company's cash conversion cycle? Round to the nearest;whole day.;a. -40 days;b. -22 days;c. -13 days;d. +22 days;e. +40 days


Paper#50902 | Written in 18-Jul-2015

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