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81) Quiet Press has an accounts receivable period of 38 days. The estimated quarterly sales for
this year, starting with the first quarter, are $1,200, $1,400, $1,900, and $1,200, respectively.
How much does the firm expect to collect in the fourth quarter? Assume a 360-day year.
A) $1,592.08
B) $1,604.44
C) $1,495.56
D) $1,509.11
E) $1,660.02
82) D & F expects credit sales of $980, $1,460, $1,730 and $950 for the months of April through
July, respectively. The firm collects 25 percent of sales in the month of sale, 65 percent of sales
in the month following the month of sale, and 8 percent in the second month following the month
of sale. The remaining sales are never collected. How much money does the firm expect to
collect in the month of July?
A) $1,645.50
B) $1,478.80
C) $1,571.10
D) $1,374.20
E) $1,475.50
83) Weisbro and Sons purchases its inventory one quarter prior to the quarter of sale. The
purchase price is 60 percent of the sales price. The accounts payable period is 45 days. The
accounts payable balance at the beginning of Quarter 1 is $39,500. The expected sales are:
Quarter 1 = $32,000; Quarter 2 = $34,500; Quarter 3 = $40,600; Quarter 4 = $50,200. What is
the amount of the expected disbursements for Quarter 2? Assume a 360-day year.
A) $19,280
B) $20,470
C) $22,530
D) $25,220
E) $19,950
84) Birds Unlimited has an accounts payable period of 60 days. The firm has expected sales of
$17,800, $22,100, $24,400 and $28,800, respectively, by quarter for the next calendar year. The
purchases for a quarter are equal to 65 percent of the following quarter's sales. What is the
amount of the projected cash disbursements for accounts payable for Quarter 3? Assume a 360-
day year.
A) $11,126.67
B) $16,813.33
C) $12,693.33
D) $17,125.50
E) $12,250.33
85) As of the beginning of the quarter, Lester's Market had a cash balance of $326. During the
quarter the market paid suppliers $310, collected $418 on its accounts receivables, paid an
interest payment of $32, and a tax bill of $184. In addition, the market borrowed $80. What was
the cash balance at the end of the quarter?
A) $298
B) $267
C) $255
D) $272
E) $286
86) On April 1st, Morning Coffee had a beginning cash balance of $318. Sales for March were
$460 and April sales were $510. During April the firm had cash expenses of $327 and payments
on accounts payable of $262. The accounts receivable period is 30 days. What is the firm's
beginning cash balance on May 1st?
A) $189
B) $173
C) $211
D) $239
E) $210
87) New World has a beginning cash balance of $536 on February 1st. The firm has projected
sales of $660 in January, $810 in February, and $890 in March. The cost of goods sold is equal
to 70 percent of sales. Goods are purchased one month prior to the month of sale. The accounts
payable period is 30 days and the accounts receivable period is 15 days. The firm has monthly
cash expenses of $225. What is the projected ending cash balance at the end of February?
Assume 30-day months.
A) $437
B) $502
C) $479
D) $423
E) $486
88) Clancy's has a beginning cash balance of $27 and a net cash inflow for the quarter of −$52.
Company policy is to maintain a minimum cash balance of $20 and borrow only the amount that
is necessary to maintain that balance. How much, if any, does the firm need to borrow this
quarter?
A) $17
B) $52
C) $45
D) $25
E) $0
89) Baxter Trucking has a net cash inflow for the quarter of $38 including interest, a beginning
cash balance of $22, and a beginning loan balance of $45. Company policy is to maintain a
minimum cash balance of $20. What is the minimum amount the firm must borrow or can repay
to end the month with a zero cumulative surplus?
A) Borrow $4
B) Borrow $9
C) Repay $36
D) Repay $422
E) Repay $40
90) Wilson's Dry Goods has a line of credit with a local bank for $250,000. The loan agreement
calls for interest of 7.6 percent with a compensating balance requirement of 5 percent, which is
based on the total amount borrowed. What is the effective interest rate if the firm needed
$138,000 for one year to cover its expansion costs?
A) 8.55 percent
B) 7.60 percent
C) 8.13 percent
D) 8.38 percent
E) 8.00 percent
91) All Rite Co. has arranged a line of credit of $225,000 with an interest rate of 8.25 percent
and a compensating balance requirement of 1.5 percent, which is based on the total amount
borrowed. Assume the firm uses this source of funding to purchase a $167,000 piece of
equipment and repays the loan in a lump sum at the end of one year. What is the effective
interest rate?
A) 9.75 percent
B) 9.27 percent
C) 8.08 percent
D) 8.26 percent
E) 8.38 percent
92) Uptown Bank has granted a line of credit of $80,000 with an interest rate of 7.5 percent and a
compensating balance requirement of 2.5 percent to Jones Hardware. The compensating balance
requirement is based on the total amount borrowed. What is the effective annual interest rate if
the firm needs $55,000 for one year to finance its inventory?
A) 8.80 percent
B) 9.44 percent
C) 8.12 percent
D) 7.69 percent
E) 7.78 percent
93) In working capital management, there are some actions that increase or decrease cash. What
are some of the items that increase and decrease the cash account, respectively?
94) As the owner of Better Built Products, you plan to implement a system whereby customers
who pay their bills within 30 days will receive a rebate of 2 percent on their purchases. Those
who pay within 5 days will receive a rebate of 3 percent. Explain the impact of this proposal on
the firm.
95) Identify the three primary characteristics of a restrictive short-term financial policy.
96) List and describe three basic types of secured inventory loans. What are the advantages and
disadvantages of each type of loan?
97) Accounts receivable and inventory are some of the most liquid assets a firm owns and their
market values are typically fairly close to book value. Even so, in the eyes of many lenders, these
assets make for inadequate collateral on loans, particularly if the business looking to borrow the
money is in a liquidity crisis. Why do you think this is the case?
98) Compensating balances are often included as a requirement for a line of credit. These
balances provide income to banks but add to the cost of financing for the borrower. Why, then,
would borrowers agree to such an arrangement?
