Question 1

Which one of the following best defines the term credit scoring?

Accepted Answer

A)  Categorizing customers into groups depending on the length of time it takes each customer to pay for purchases
B)  Compiling a list of accounts receivable segregated by the length of time each receivable has been outstanding
C)  Evaluating the opportunity costs of a credit policy
D)  Process of quantifying the probability of default when granting credit to customers
E)  Tracking of both the number and the size of customer orders over a period of timeF) A) and B)
G) A) and C)

Question 2

Smelly Perfumes sells 3,500 units of its perfume collection each year at a price per unit of $275.All sales are on credit with terms of 1/7,net 30.The discount is taken by 40 percent of the customers.What is the amount of the company's accounts receivable?

Accepted Answer

A)  $54,849
B)  $58,246
C)  $61,003
D)  $64,815
E)  $67,778F) A) and E)
G) A) and D)

Question 3

Which one of the following is a special post office mailbox that is used to speed up the collection of accounts receivable payments?

Accepted Answer

A)  Separation box
B)  Cash box
C)  Concentration account
D)  Lockbox
E)  Float boxF) A) and B)
G) B) and D)

Question 4

Which one of the following is the bill given to a customer for goods he or she purchased?

Accepted Answer

A)  Account aging
B)  Invoice
C)  Docket
D)  Remittance advice
E)  Shipping receiptF) All of the above
G) A) and E)

Question 5

Charlies's writes 135 checks a day for an average amount of $480 each.These checks generally clear the bank in 3 days.In addition,the firm generally receives an average of $159,000 a day in checks that are deposited immediately.Deposited funds are available in 1.5 days.What is the firm's net float?

Accepted Answer

A)  Net disbursement float of $94,200
B)  Net disbursement float of $44,100
C)  Net disbursement float of $34,750
D)  Net collection float of $44,100
E)  Net collection float of $94,200F) B) and E)
G) B) and C)

Question 6

Float is defined as the difference between which of the following?

Accepted Answer

A)  Beginning cash balance and the ending cash balance as shown on a cash budget
B)  Ledger balance and the available balance
C)  Book balance and the ledger balance
D)  Collections and disbursements for any given period of time
E)  Available balance and the collected balanceF) C) and E)
G) A) and D)

Question 7

Which of the following characteristics will tend to cause a firm to adopt a more liberal credit policy?
I.Repeat customers
II.Excess capacity
III.High variable costs
IV.Limited competition

Accepted Answer

A)  I and II only
B)  III and IV only
C)  I, II, and III only
D)  II, III, and IV only
E)  I, II, III, and IVF) A) and D)
G) A) and C)

Question 8

Which one of the following best represents the transaction motive for holding cash?

Accepted Answer

A)  Buying extra inventory in response to an unexpected sale offered by a supplier
B)  Distributing the weekly paychecks
C)  Increasing the minimum cash balance for the firm's main bank account
D)  Unexpectedly purchasing a competitor's firm
E)  Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep risingF) A) and B)
G) A) and C)

Question 9

Which one of the following defines the terms of sale?

Accepted Answer

A)  Period of time during which a discount can be taken on an invoice
B)  Period of time granted to a customer to pay for the goods or services received
C)  Legal documents related to the credit sale of either goods or services
D)  Conditions under which a firm sells its goods or services for either cash or credit
E)  Process used to determine which customers will be granted credit and which will notF) A) and C)
G) A) and D)

Question 10

During a normal month,Florence Lumber receives a total of eight checks with a total value of $576,000.On average,it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Accepted Answer

A)  $19,200
B)  $273,000
C)  $576,000
D)  8,190,000
E)  $17,280,000F) D) and E)
G) All of the above

Question 11

The Priceville Bull Dogs offers credit terms of 2/15,net 40 to all of its customers.Historically,80 percent of its customers take advantage of the discount.What is the firm's average collection period?

Accepted Answer

A)  17.60 days
B)  17.87 days
C)  18.20 days
D)  20.33 days
E)  21.08 daysF) B) and C)
G) C) and D)

Question 12

A firm offers terms of 2/5,net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

Accepted Answer

A)  21.69 percent
B)  24.42 percent
C)  28.97 percent
D)  31.08 percent
E)  34.31 percentF) B) and E)
G) None of the above

Question 13

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Accepted Answer

A)  Extended EOQ
B)  Just-in-time
C)  ABC approach
D)  Materials requirements planning
E)  Economic order quantityF) All of the above
G) A) and E)

Question 14

You place an order for 800 units of Good Y at a unit price of $33.The supplier offers terms of 1/15,net 45.The supplier is offering you a discount of _____ if you pay within ____ days.

Accepted Answer

A)  $264; 15
B)  $264; 30
C)  $264; 45
D)  $1,600; 15
E)  $1,600; 45F) B) and E)
G) B) and D)

Question 15

Decatur Arts Center writes 158 checks a day for an average amount of $211 each.These checks generally clear the bank 3.5 days after they are written.In addition,the firm generally receives an average of $50,000 a day in checks.The checks that are received are deposited immediately and the funds are generally available the following day.What is the amount of the firm's disbursement float?

Accepted Answer

A)  $104,625.00
B)  $116,683.00
C)  $155,255.50
D)  $170,450.00
E)  $50,000.00F) A) and B)
G) A) and E)

Question 16

Which one of the following 5 Cs refers to the general economic climate in a customer's line of business?

Accepted Answer

A)  Capital
B)  Conditions
C)  Capacity
D)  Character
E)  CollateralF) B) and C)
G) A) and B)

Question 17

Which one of the following is most apt to delay the collection of cash?

Accepted Answer

A)  Having customers mail checks to a local lockbox rather than the home office
B)  Depositing checks throughout the day
C)  Posting payments to accounts receivable prior to making deposits
D)  Collecting mail twice daily
E)  Supplying customers with bar coded payment slipsF) A) and B)
G) A) and C)

Question 18

The optimal credit policy will do which one of the following?

Accepted Answer

A)  Maximize sales
B)  Minimize bad debts
C)  Maximize units sold
D)  Minimize the total costs of granting credit
E)  Minimize carrying costsF) D) and E)
G) None of the above

Question 19

University Furniture sells 2,500 sofas a year at an average price per sofa of $1,250.The carrying cost per unit is $11.60.The company orders 80 sofas at a time and has a fixed order cost of $55 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Accepted Answer

A)  154 sofas
B)  172 sofas
C)  181 sofas
D)  198 sofas
E)  211 sofasF) A) and E)
G) B) and D)

Question 20

Which one of the following is a disbursement account into which funds are transferred only as needed to cover the demands for payment?

Accepted Answer

A)  Master account
B)  Controlled disbursement account
C)  Bank controlled account
D)  Investment account
E)  Safety stock accountF) All of the above
G) A) and B)

Exam 17: Working Capital Management

During a normal month,Florence Lumber receives a total of eight checks with a total value of $576,000.On average,it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Correct Answer
verified

You place an order for 800 units of Good Y at a unit price of $33.The supplier offers terms of 1/15,net 45.The supplier is offering you a discount of _ if you pay within days.

Correct Answer
verified

Which of the following characteristics will tend to cause a firm to adopt a more liberal credit policy? I.Repeat customers II.Excess capacity III.High variable costs IV.Limited competition

Correct Answer
verified

Which one of the following is most apt to delay the collection of cash?

Correct Answer
verified

Float is defined as the difference between which of the following?

Correct Answer
verified

Which one of the following is a special post office mailbox that is used to speed up the collection of accounts receivable payments?

Correct Answer
verified

Which one of the following defines the terms of sale?

Correct Answer
verified

University Furniture sells 2,500 sofas a year at an average price per sofa of $1,250.The carrying cost per unit is $11.60.The company orders 80 sofas at a time and has a fixed order cost of $55 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Correct Answer
verified

Correct Answer
verified

The optimal credit policy will do which one of the following?

Correct Answer
verified

Which one of the following is the bill given to a customer for goods he or she purchased?

Correct Answer
verified

A firm offers terms of 2/5,net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

Correct Answer
verified

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Correct Answer
verified

Charlies's writes 135 checks a day for an average amount of $480 each.These checks generally clear the bank in 3 days.In addition,the firm generally receives an average of $159,000 a day in checks that are deposited immediately.Deposited funds are available in 1.5 days.What is the firm's net float?

Correct Answer
verified

Which one of the following is a disbursement account into which funds are transferred only as needed to cover the demands for payment?

Correct Answer
verified

Which one of the following 5 Cs refers to the general economic climate in a customer's line of business?

Correct Answer
verified

The Priceville Bull Dogs offers credit terms of 2/15,net 40 to all of its customers.Historically,80 percent of its customers take advantage of the discount.What is the firm's average collection period?

Correct Answer
verified

Which one of the following best defines the term credit scoring?

Correct Answer
verified

Smelly Perfumes sells 3,500 units of its perfume collection each year at a price per unit of $275.All sales are on credit with terms of 1/7,net 30.The discount is taken by 40 percent of the customers.What is the amount of the company's accounts receivable?

Correct Answer
verified

Which one of the following best represents the transaction motive for holding cash?

Correct Answer
verified

Exam 17: Working Capital Management

During a normal month,Florence Lumber receives a total of eight checks with a total value of $576,000.On average,it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Correct AnswerverifiedShow Answer

You place an order for 800 units of Good Y at a unit price of $33.The supplier offers terms of 1/15,net 45.The supplier is offering you a discount of _____ if you pay within ____ days.

Correct AnswerverifiedShow Answer

Which of the following characteristics will tend to cause a firm to adopt a more liberal credit policy? I.Repeat customers II.Excess capacity III.High variable costs IV.Limited competition

Correct AnswerverifiedShow Answer

Which one of the following is most apt to delay the collection of cash?

Correct AnswerverifiedShow Answer

Float is defined as the difference between which of the following?

Correct AnswerverifiedShow Answer

Which one of the following is a special post office mailbox that is used to speed up the collection of accounts receivable payments?

Correct AnswerverifiedShow Answer

Which one of the following defines the terms of sale?

Correct AnswerverifiedShow Answer

University Furniture sells 2,500 sofas a year at an average price per sofa of $1,250.The carrying cost per unit is $11.60.The company orders 80 sofas at a time and has a fixed order cost of $55 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The optimal credit policy will do which one of the following?

Correct AnswerverifiedShow Answer

Which one of the following is the bill given to a customer for goods he or she purchased?

Correct AnswerverifiedShow Answer

A firm offers terms of 2/5,net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

Correct AnswerverifiedShow Answer

Which one of the following inventory management approaches determines the finished goods inventory level and then works backward until the raw material needs are determined?

Correct AnswerverifiedShow Answer

Charlies's writes 135 checks a day for an average amount of $480 each.These checks generally clear the bank in 3 days.In addition,the firm generally receives an average of $159,000 a day in checks that are deposited immediately.Deposited funds are available in 1.5 days.What is the firm's net float?

Correct AnswerverifiedShow Answer

Which one of the following is a disbursement account into which funds are transferred only as needed to cover the demands for payment?

Correct AnswerverifiedShow Answer

Which one of the following 5 Cs refers to the general economic climate in a customer's line of business?

Correct AnswerverifiedShow Answer

The Priceville Bull Dogs offers credit terms of 2/15,net 40 to all of its customers.Historically,80 percent of its customers take advantage of the discount.What is the firm's average collection period?

Correct AnswerverifiedShow Answer

Which one of the following best defines the term credit scoring?

Correct AnswerverifiedShow Answer

Smelly Perfumes sells 3,500 units of its perfume collection each year at a price per unit of $275.All sales are on credit with terms of 1/7,net 30.The discount is taken by 40 percent of the customers.What is the amount of the company's accounts receivable?

Correct AnswerverifiedShow Answer

Which one of the following best represents the transaction motive for holding cash?

Correct AnswerverifiedShow Answer

Correct Answer
verified

You place an order for 800 units of Good Y at a unit price of $33.The supplier offers terms of 1/15,net 45.The supplier is offering you a discount of _ if you pay within days.

Correct Answer
verified

Correct Answer
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