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Question;Essay;Questions;97. List and describe the three basic types of secured;inventory loans. Compare the advantages and disadvantages of these loans.;98. Using two separate graphs, illustrate a flexible;and a restrictive short-term financing policy. Place costs on the vertical axis;and current assets on the horizontal axis. On each graph, indicate the shortage;costs, carrying costs, total costs, and indicate the optimal investment in;current assets.;99. Assume that long-term interest rates are;substantially higher than short-term interest rates and are expected to remain;that way for the foreseeable future. How does this affect a firm's selection of;a financing policy for its current assets?;100. Compensating balances are frequently a part of;revolving lending arrangements with banks, yet they add to the cost of;financing for the borrower. Why, then, would borrowers agree to such terms?;What other types of alternative financing are available?;Multiple;Choice Questions;101. Details Corp. has a book net worth of $8,150.;Long-term debt is $1,650. Net working capital, other than cash, is $2,150.;Fixed assets are $2,000. How much cash does the company have?;A. $4,250;B. $4,550;C. $5,150;D. $5,650;E. $6,750;102. The Wake-Up Coffee Company has projected the;following quarterly sales amounts for the coming year;Accounts receivable at the beginning of the year are $200. Wake-Up has a 60-day;collection period. What is the amount of the accounts receivable balance at the;end of Quarter 3?;A. $375;B. $450;C. $500;D. $600;E. $700;103. Consider the following financial statement;information for the Bulldog Icers Corporation;How long is the cash cycle?;A. 36.6 days;B. 37.2 days;C. 41.0 days;D. 41.4 days;E. 42.8 days;104. Your firm has an average collection period of 42;days. Current practice is to factor all receivables immediately at a 4 percent;discount. Assume that default is extremely unlikely. What is the effective cost;of borrowing?;A. 28.79 percent;B. 36.20 percent;C. 37.78 percent;D. 40.97 percent;E. 42.58 percent;105. Workout Together has projected the following;sales for the coming year;Sales in the year following this one are projected to be 18 percent greater in;each quarter. Assume the firm places orders during each quarter equal to 29;percent of projected sales for the next quarter. How much will the firm pay to;its suppliers in Quarter 2 if its accounts payable period is 60 days?;A. $212.67;B. $224.33;C. $241.67;D. $251.33;E. $256.67;106. The Thunder Dan's Corporation's purchases from;suppliers in a quarter are equal to 65 percent of the next quarter's forecasted;sales. The payables period is 60 days. Wages, taxes, and other expenses are 16;percent of sales, and interest and dividends are $60 per quarter. No capital;expenditures are planned. Sales for the first quarter of the following year are;projected at $720. The projected quarterly sales are;What is the amount of the total disbursements for Quarter 2?;A. $564.27;B. $579.43;C. $582.15;D. $585.30;E. $590.67;107. The following is the sales budget for Duck-n-Run;Inc., for the first quarter of 2009;The accounts receivable balance at the end of the previous quarter was $45,000;($32,000 of which was uncollected December sales.) What is the amount of the;January collections?;A. $112,400.00;B. $112,408.16;C. $115,703.03;D. $122,356.33;E. $125,400.00;108. Here are some important figures from the budget;of Nashville Nougats, Inc., for the second quarter of 2009;The company predicts that 3 percent of its credit sales will never be;collected, 36 percent of its sales will be collected in the month of sale, and;the remaining 61 percent will be collected in the following month. Credit;purchases will be paid in the month following the purchase.;In March 2009, credit sales were $302,400, and credit purchases were $224,640.;The April 1 cash balance was $403,200. What is the cash balance at the end of;May?;A. $348,887;B. $366,846;C. $414,141;D. $457,777;E. $477,374;109. You've worked out a line of credit arrangement;that allows you to borrow up to $50 million at any time. The interest rate is;0.5 percent per month. In addition, 5 percent of the amount that you borrow;must be deposited in a non-interest bearing account. Assume your bank uses;compound interest on its line of credit loans. What is the effective annual;interest rate on this lending arrangement?;A. 6.50 percent;B. 6.62 percent;C. 6.81 percent;D. 6.87 percent;E. 6.94 percent;110. A bank offers your firm a revolving credit;arrangement for up to $115 million at an interest rate of 2 percent per;quarter. The bank also requires you to maintain a compensating balance of 5;percent against the unused portion of the credit line, to be deposited in a;non-interest-bearing account. Assume you have a short-term investment account;at the bank that pays 1.3 percent per quarter, and assume the bank uses;compound interest on its revolving credit loans. What is the effective annual;interest rate on the revolving credit arrangement if your firm does not borrow;any money during the year?;A. 0 percent;B. 5.0 percent;C. 5.2 percent;D. 5.3 percent;E. 5.5 percent;45. The Hobby Shop has a checking account with a;ledger balance of $692. The firm has $1,063 in uncollected deposits and $846 in;outstanding checks. What is the amount of the disbursement float on this;account?;A. $0;B. $217;C. $846;D. $909;E. $1,063;46. On an average day, Plastics Enterprises writes 42;checks with an average amount of $587. These checks clear the bank in an;average of 2 days. What is the average amount of the disbursement float?;A. $1,174;B. $5,805;C. $24,654;D. $49,308;E. $73,962;47. On average, your firm receives 62 checks a day;from customers. These checks, on average, are worth $39.90 each and clear the;bank in 1.5 days. In addition, your firm disburses 38 checks a day with an;average amount of $89.50. These checks clear your bank in 2 days. What is the;average amount of the collection float?;A. $2,473.80;B. $3,401.00;C. $3,710.70;D. $5,101.50;E. $6,802.00;48. When Chris balanced her business checkbook, she;had an adjusted bank balance of $11,418. She had 2 outstanding deposits worth;$879 each and 11 checks outstanding with a total value of $3,648. What is the;amount of the collection float on this account?;A. -$1,890;B. $1,758;C. $3,648;D. $5,406;E. $6,012;49. Your company has an available balance of $7,911. A;deposit of $2,480 that was made this morning is not yet included in the bank's;balance. There are also 4 checks outstanding with a value of $325 each. What is;the net float?;A. net collection float of $1,180;B. net collection float of $2,480;C. net float of $6,731;D. net disbursement float of $1,300;E. net disbursement float of $2,480


Paper#51110 | Written in 18-Jul-2015

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