WEEK 6 QUIZ

QUESTION 1

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

Increase

Decrease

No change

QUESTION 2

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

No change

Increase

Decrease

QUESTION 3

Indicate the effect of the following on the cash cycle: Customers take longer to make the payment

Increase

Decrease

No change

QUESTION 4

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

Relatively high ratio of current assets to total assets

Relatively low level of inventory

Relatively high ratio of short-term debt to total debt

Relatively low level of liquidity

Relatively low level of accounts receivable

QUESTION 5

ABC Company has annual sales of $466,446 and cost of goods sold of $198,600. The average accounts receivable balance is $68,027. How many days on average does it take the firm to collect its accounts receivable? Assume 365 days.

Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

QUESTION 6

On July 15th, you purchased $10,000 worth of goods. The terms of the sale were 3/5, net 31. What is the effective annual rate of interest for the credit period for this sale?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 7

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

decrease in accounts payable turnover ratio

decrease in days' sales in inventory

decrease in average collection period

decrease in accounts payable period

Decrease in inventory turnover ratio

QUESTION 8

As of this morning, your firm had a ledger balance of $4,354 with no outstanding deposits or checks. Today, your firm deposited 8 checks in the amount of $358 each and wrote 14 checks in the amount of $677. What is the amount of the disbursement float as of the end of the day?

Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 9

Month Sales $ Month Sales $

Jan 13,921 July 30,510

Feb 28,928 Aug 45,387

Mar 45,387 Sep 13,921

Apr 30,510 Oct 45,387

May 13,921 Nov 28,928

June 28,928 Dec 30,510

The company has estimated expenses as follows:

General and administrative expenses: $5,046

Material purchases are 23 percent of sales. Material purchases are paid in the month following the purchase.

Interest payment per month: $4,173

Rent expenses per quarter starting March: $4,381

Calculate the cash outflows for June.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 10

ABC Company has an average collection period of 38 days and factors all of its receivables immediately at a 1.5 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 11

ABC Corporation currently has an inventory turnover of 5.05, a payables turnover of 24.95, and a receivables turnover of 11.09. How many days are in the cash cycle?

Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

QUESTION 12

Compute the cash cycle based on the following information:

Average Collection Period = 57

Accounts Payable Period = 28

Average Age of Inventory = 53

QUESTION 13

The terms of the sale were 4/6, net 48. What is the effective annual rate of interest?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

QUESTION 14

ABC Company writes 289 checks a day for an average amount of $426 each. These checks generally clear the bank in 2 days. In addition, the firm generally receives an average of $139,219 a day in checks that are deposited immediately. Deposited funds are available in 1 days. What is the firm's net float?

Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 15

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

Average A/P balance = $32,791

Annual Cost of Goods Sold = $481,671

Assume 365 days

Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

QUESTION 16

As of this morning, your firm had a ledger balance of $3,180 with no outstanding deposits or checks. Today, your firm deposited 3 checks in the amount of $321 each and wrote a check in the amount of $792. What is the amount of the collection float as of the end of the day?

Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 17

ABC Corporation currently has an inventory turnover of 19.73, a payables turnover of 8.84, and a receivables turnover of 9.12. How many days are in the operating cycle?

Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

QUESTION 18

ABC Company has a cash cycle of 12.46 days, an operating cycle of 23.77 days, and an average collection period of 5 days. The company reported cost of goods sold of $275,723. What is the company's average balance in Accounts Payable?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box

QUESTION 19

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

Increase in long-term debt

decrease in current liabilities

Increase in current assets

Increase in fixed assets

decrease in equity

QUESTION 20

Month Sales $ Month Sales $

Jan 29,588 July 16,322

Feb 49,651 Aug 22,262

Mar 22,262 Sep 29,588

Apr 16,322 Oct 22,262

May 29,588 Nov 49,651

June 49,651 Dec 16,322

Sales are collected as follows:

In the month of Sales: 31%

In the next month: 29%

After 2 months: 10%

After 3 months: remainder is collected

Calculate the cash collection for December.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 21

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

Decrease in accounts receivable

Increase in fixed assets

decrease in current liabilities

decrease in long-term debt

increase in inventory

QUESTION 22

Month Sales $ Month Sales $

Jan 30,770 July 35,267

Feb 10,332 Aug 43,058

Mar 43,058 Sep 30,770

Apr 35,267 Oct 43,058

May 30,770 Nov 10,332

June 10,332 Dec 35,267

Sales are collected as follows:

In the month of Sales: 31%

In the next month: 33%

After 2 months: 11%

After 3 months: remainder is collected

Calculate the cash collection for November.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 23

ABC Company has annual sales of $400,000 and cost of goods sold of $177,489. The accounts payable period is 28.32 days. What is the average accounts payable balance?

Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

QUESTION 24

Month Sales $ Month Sales $

Jan 35,777 July 41,605

Feb 21,248 Aug 18,333

Mar 18,333 Sep 35,777

Apr 41,605 Oct 18,333

May 35,777 Nov 21,248

June 21,248 Dec 41,605

Sales are collected as follows:

In the month of Sales: 34%

In the next month: 28%

After 2 months: 9%

Remainder is considered as bad debt and is not collected.

Calculate the cash collection for June.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.