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Question;Helena Furnishings wants to sharply;reduce its cash conversion cycle. Which of the following steps would reduce its;cash conversion cycle?;a. The company increases its average inventory without increasing its sales.;b. The company reduces its DSO.;c. The company starts paying its bills sooner, which reduces its average;accounts payable without reducing its sales.;d. Statements a and b are correct.;e. All of the statements above are correct.;Other things held constant, which of;the following will cause an increase in working capital?;a. Cash is used to buy marketable securities.;b. A cash dividend is declared and paid.;c. Merchandise is sold at a profit, but the sale is on credit.;d. Long-term bonds are retired with the proceeds of a preferred stock issue.;e. Missing inventory is written off against retained earnings.;Which of the following is typically;part of the cash budget?;a. Payments lag.;b. Payment for plant construction.;c. Cumulative cash.;d. Statements a and c are correct.;e. All of the statements above are correct.;Which of the following statements;concerning the cash budget is correct?;a. Depreciation expense is not explicitly included, but depreciation effects;are implicitly included in estimated tax payments.;b. Cash budgets do not include financial expenses such as interest and dividend;payments.;c.Cash budgets do not include cash inflows from long-term sources such as bond;issues.;d. Statements a and b are correct.;e. Statements a and c are correct.;a. Depreciation expense is not explicitly included;but depreciation effects are implicitly included in estimated tax payments.;???;Which of the following items should a;company explicitly include in its monthly cash budget?;a. Its monthly depreciation expense.;b. Its cash proceeds from selling one of its divisions.;c. Interest paid on its bank loans.;d. Statements b and c are correct.;e. All of the statements above are correct.;Which of the following statements is;most correct?;a. A cash management system which minimizes collections float and maximizes;disbursement float is better than one with higher collections float and lower;disbursement float.;b. A cash management system which maximizes collections float and minimizes;disbursement float is better than one with lower collections float and higher;disbursement float.;c. The use of a lockbox is designed to minimize cash theft losses. If the cost;of the;lockbox is less than theft losses saved, then the lockbox should be installed.;d. Other things held constant, a firm will need an identical line of credit if;it can arrange to pay its bills by the 5th of each month than if its bills come;due uniformly during the month.;e. The statements above are all false.;Which of the following statements is;most correct?;a. A good cash management system would inimize disbursement float and maximize;collections float.;b. If a firm begins to use a well-designed lockbox system, this will reduce its;customers' net float.;c. In the early 1980's, the prime interest rate hit a high of 21 percent. In;1995 the prime rate was considerably lower. That sharp interest rate decline;has increased firms' concerns about the efficiency of their cash management;programs.;d. If a firm can get its customers to permit it to pay by wire transfers rather;than having to write checks, this will increase its net float and thus reduce;its required cash balances.;e. A firm which has such an efficient cash management system that it has;positive net float can have a negative checkbook balance at most times and;still not have its checks bounce.;?;A lockbox plan is;a. A method for safe-keeping of marketable securities.;b. Used to identify inventory safety stocks.;c. A system for slowing down the collection of checks written by a firm.;d. A system for speeding up a firm's collections of checks received.;e. Not described by any of the statements above.;Which of the following might be;attributed to efficient inventory management?;a. High inventory turnover ratio.;b. Low incidence of production schedule disruptions.;c. High total assets turnover.;d. Statements a and c are correct.;e. All of the statements above are correct.;Analyzingdays sales outstanding (DSO);and the aging schedule are two common methods for monitoring receivables.;However, they can provide erroneous signals to credit managers when;a. Customers' payments patterns are changing.;b. Sales fluctuate seasonally.;c. Some customers take the discount and others do not.;d. Sales are relatively constant, either seasonally or cyclically.;e. None of the statements above is correct.;Which of the following is not commonly;regarded as being a credit policy variable?;a. Credit period.;b. Collection policy.;c. Credit standards.;d. Cash discounts.;e. All of the statements above are credit policy variables.;If easing a firm's credit policy;lengthens the collection period and results in a worsening;of the aging schedule, then why do firms take such actions?;a. It normally stimulates sales.;b. To meet competitive pressures.;c. To increase the firm's deferral period for payables.;d. Statements a and b are correct.;e. All of the statements above are correct.;Firms generally choose to finance;temporary net operating working capital with shortterm debt because;a. Matching the maturities of assets and liabilities reduces risk.;b. Short-term interest rates have traditionally been more stable than long-term;interest rates.;c. A firm that borrows heavily long-term is more apt to be unable to repay the;debt than a firm that borrows heavily short-term.;d. The yield curve has traditionally been downward sloping.;e. Sales remain constant over the year, and financing requirements also remain;constant;Which of the following statements is;most correct?;a. Trade credit is provided to a business only when purchases are made.;b. Commercial paper is a form of short-term financing that is primarily used by;large;financially stable companies.;c. Short-term debt, while often cheaper than long-term debt, exposes a firm to;the;potential problems associated with rolling over loans.;d. Statements b and c are correct.;e. All of the statements above are correct.;Which of the following statements is;incorrect?;a. Commercial paper can be issued by virtually any firm so long as it is;willing to pay the going interest rate.;b. Accruals are "free" in the sense that no explicit interest is paid;on these funds.;c. A conservative approach to working capital will result in all permanent;assets being financed using long-term securities.;d. The risk to the firm of borrowing with short-term credit is usually greater;than with long-term debt. Added risk can stem from greater variability of;interest costs on short-term debt.;e. Bank loans have a lower interest rate than commercial paper.;Which of the following is not a;situation that might lead a firm to hold marketable securities?;a. The firm has purchased a fixed asset that will require a large write-off of;depreciable expense.;b. The firm must meet a known financial commitment, such as financing an;ongoing construction project.;c. The firm must finance seasonal operations.;d. The firm has just sold long-term securities and has not yet invested the;proceeds in earning assets.;e. None of the statements above is correct. (All of the situations might lead;the firm to hold marketable securities.);Which of the following statements;concerning commercial paper is incorrect?;a. Commercial paper is generally written for terms less than 270 days.;b. Commercial paper generally carries an interest rate below the prime rate.;c. Commercial paper is sold to money market mutual funds, as well as to other;financial;institutions and nonfinancial corporations.;d. Commercial paper can be issued by virtually any firm so long as it is;willing to pay the going interest rate.;e. Commercial paper is a type of unsecured promissory note issued by large;strong;firms.;Ignoring cost and other effects on the;firm, which of the following measures would tend to reduce the cash conversion;cycle?;a. Maintain the level of receivables as sales decrease.;b. Buy more raw materials to take advantage of price breaks.;c. Take discounts when offered.;d. Forgo discounts that are currently being taken.;e. Offer a longer deferral period to customers.;Which of the following actions are;likely to reduce the length of a company's cash conversion cycle?;a. Adopting a new inventory system that reduces the inventory conversion;period.;b. Reducing the average days sales outstanding (DSO) on its accounts;receivable.;c. Reducing the amount of time the company takes to pay its suppliers.;d. Statements a and b are correct.;e. All of the statements above are correct.

 

Paper#50966 | Written in 18-Jul-2015

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