Indicate the effect of the following on the cash cycle: Accounts payable period goes up

1. Indicate the effect of the following on the cash cycle: Accounts payable period goes up

		Decrease
		Increase
		No change

2. Indicate the effect of the following on the cash cycle: Accounts payable turnover goes up

		Increase
		Decrease
		No change

3. OnJuly 15^th, you purchased $10,000 worth of goods. The terms of the sale were 1/8, net 49. What is the effective annual rate of interest for the credit period for this sale?

4. ABC Company has annual sales of $400,000 and cost of goods sold of $79,161. The accounts payable period is 34.53 days. What is the average accounts payable balance?

5. Which one of the following is most indicative of a flexible short-term financial policy?

		Relatively low level of liquidity
		Relatively high ratio of short-term debt to total debt
		Relatively high ratio of current assets to total assets
		Relatively low level of accounts receivable
		Relatively low level of inventory

6. ABC Company has an average collection period of 29 days and factors all of its receivables immediately at a 2.4 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?

7. Compute the Accounts Payable (A/P) period based on the following information:

Average A/P balance = $44,730
Annual Cost of Goods Sold = $122,454
Assume 365 days

8. Compute the cash cycle based on the following information:

Average Collection Period = 65
Accounts Payable Period = 25
Average Age of Inventory = 78

9. ABC Company sells 2,052 chairs a year at an average price per chair of $128. The carrying cost per unit is $27.87. The company orders 242 chairs at a time and has a fixed order cost of $42.3 per order. The chairs are sold out before they are restocked. What are the total carrying costs?

10.

Month	Sales $	Month	Sales $
Jan	43,896	July	47,444
Feb	33,553	Aug	47,045
Mar	47,045	Sep	43,896
Apr	47,444	Oct	47,045
May	43,896	Nov	33,553
June	33,553	Dec	47,444

The company has estimated expenses as follows:

General and administrative expenses: $3,030
Material purchases are 34 percent of sales. Material purchases are paid in the month following the purchase.
Interest payment per month: $3,105
Rent expenses per quarter starting March: $6,724

Calculate the cash outflows for June.

11. ABC Corporation currently has an inventory turnover of 30.57, a payables turnover of 7.69, and a receivables turnover of 5.39. How many days are in the operating cycle?

12. As of this morning, your firm had a ledger balance of $4,402 with no outstanding deposits or checks. Today, your firm deposited 4 checks in the amount of $161 each and wrote a check in the amount of $660. What is the amount of the collection float as of the end of the day?

13. ABC Company writes 384 checks a day for an average amount of $528 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $163,586 a day in checks that are deposited immediately. Deposited funds are available in 1 days. What is the firm's net float?

14. Identify a source of cash from below. Choose only one.

		decrease in long-term debt
		Increase in fixed assets
		Decrease in accounts receivable
		decrease in current liabilities
		increase in inventory

15. ABC Corporation currently has an inventory turnover of 11.66, a payables turnover of 9.95, and a receivables turnover of 12.75. How many days are in the cash cycle?

16. Which of the following is a Source of Cash? Choose only one.

		Increase in long-term debt
		decrease in current liabilities
		decrease in equity
		Increase in current assets
		Increase in fixed assets

17.

Month	Sales $	Month	Sales $
Jan	19,300	July	16,066
Feb	28,418	Aug	39,748
Mar	39,748	Sep	19,300
Apr	16,066	Oct	39,748
May	19,300	Nov	28,418
June	28,418	Dec	16,066

Sales are collected as follows:

In the month of Sales: 33%
In the next month: 28%
After 2 months: 7%
Remainder is considered as bad debt and is not collected.

Calculate the cash collection for June.

18.

Month	Sales $	Month	Sales $
Jan	16,319	July	46,147
Feb	25,501	Aug	17,598
Mar	17,598	Sep	16,319
Apr	46,147	Oct	17,598
May	16,319	Nov	25,501
June	25,501	Dec	46,147

Sales are collected as follows:

In the month of Sales: 31%
In the next month: 28%
After 2 months: 12%
After 3 months: remainder is collected

Calculate the cash collection for December.

19. ABC Company has annual sales of $477,105 and cost of goods sold of $198,600. The average accounts receivable balance is $96,051. How many days on average does it take the firm to collect its accounts receivable? Assume 365 days.

20. The terms of the sale were 4/17, net 61. What is the effective annual rate of interest?

21.

Month	Sales $	Month	Sales $
Jan	25,207	July	20,404
Feb	25,480	Aug	27,884
Mar	27,884	Sep	25,207
Apr	20,404	Oct	27,884
May	25,207	Nov	25,480
June	25,480	Dec	20,404

Sales are collected as follows:

In the month of Sales: 41%
In the next month: 24%
After 2 months: 13%
After 3 months: remainder is collected

Calculate the cash collection for November.

22. ABC Company sells 3,287 chairs a year at an average price per chair of $181. The carrying cost per unit is $15.09. The company orders 500 chairs at a time and has a fixed order cost of $66 per order. The chairs are sold out before they are restocked. What is the economic order quantity?

23. ABC Company has a cash cycle of 10.43 days, an operating cycle of 21.48 days, and an average collection period of 6 days. The company reported cost of goods sold of $293,104. What is the company's average balance in Accounts Payable?

24. ABC Company sells 2,014 chairs a year at an average price per chair of $126. The carrying cost per unit is $39.72. The company orders 365 chairs at a time and has a fixed order cost of $82.8 per order. The chairs are sold out before they are restocked. What are the total shortage costs?

25. Identify which of the following will increase the operating cycle. Choose only one.

		decrease in days' sales in inventory
		decrease in average collection period
		decrease in accounts payable period
		Decrease in inventory turnover ratio
		decrease in accounts payable turnover ratio

26. ABC Company sells 3,350 chairs a year at an average price per chair of $148. The carrying cost per unit is $35.71. The company orders 302 chairs at a time and has a fixed order cost of $129 per order. The chairs are sold out before they are restocked. How many orders will company place if it follows the economic order quantity model?

27. As of this morning, your firm had a ledger balance of $4,524 with no outstanding deposits or checks. Today, your firm deposited 3 checks in the amount of $117 each and wrote 14 checks in the amount of $962. What is the amount of the disbursement float as of the end of the day?