Principles of Finance, 6e
Besley/Brigham
Principles of Finance, 6e
Besley/Brigham
Chapter 15
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133. A firm changes its credit policy from 2/10, net 30, to 3/10, net 30. The change is meant to meet competition, so no
increase in sales is expected. Average accounts receivable will probably decline as a result of this change.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Change in Credit Policy
134. Inventory management focuses on three basic questions: (1) how many units to hold in stock, (2) how many units of
each item to order, and (3) at what point to reorder.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Inventory Management
135. The central goal of inventory management is to provide sufficient incentives to ensure that the firm never suffers a
stock-out (i.e. runs out of an inventory item).
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Goal of Inventory Management
136. The principal goal of most inventory management systems is to balance the costs of ordering, shipping, and receiving
goods with the cost of carrying those goods, while simultaneously meeting the firm’s policy with respect to avoiding
running short of stock and disrupting production schedules.
a.
True
b.
False
Principles of Finance, 6e
Besley/Brigham
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ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Goal of Inventory Management
137. Generally, ordering costs are the single most important cost element in inventory management, because they are
greater in magnitude than carrying costs.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Ordering Costs
138. The economic order quantity is that order quantity that results in the minimum ordering costs.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Ordering Costs
139. The economic order quantity (EOQ) is that order quantity that results in the minimum ordering cost and the
minimum carrying cost; that is, the EOQ minimizes both of these cost components individually.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Principles of Finance, 6e
Besley/Brigham
Chapter 15
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b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Out-Sourcing
144. Credit policy for the multinational firm is generally riskier due in part to the additional consideration of exchange
rates and also due to uncertainty regarding the credit worthiness of many foreign customers.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
International Credit Management
145. Due to advanced technology and the similarity of general procedures, working capital management for multinational
firms is no more complex than it is for domestic firms.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
International Working Capital Management
146. Exchange rates influence a multinational firm’s inventory policy because changing currency values can affect the
value of inventory.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Principles of Finance, 6e
Besley/Brigham
Chapter 15
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b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Risk and Short-Term Financing
154. Synchronization of cash flows is an important cash management technique and effective synchronization can actually
increase a firm’s profitability.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Synchronization of Cash Flows
155. A lockbox plan is one method of speeding up the check-clearing process for customer payments and decreasing the
firm’s net float position.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Using Float
156. An aggressive method of financing an ongoing construction program would be for a company to sell bonds and
equity before it actually needs funds, and to invest the proceeds in marketable securities until they are actually needed.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Principles of Finance, 6e
Besley/Brigham
Chapter 15
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a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Cash Budget
171. Because the use of short-term debt to finance fixed assets is a working capital decision variable in the current period,
it does not need to be taken into account when managers assess the firm’s ability to meet its current obligations using
expected cash inflows.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Working Capital Decisions
172. Working capital needs typically decline during recessions and increase during booms in the economy.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Working Capital
173. The inventory conversion period is the length of time from the payment for the purchase of raw materials to
manufacture a product until the collection of accounts receivable associated with the sale of that product.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
174. The payables deferral period is the average length of time required to convert the firm’s receivables into cash.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-05 – Financial Analysis and Cash Flows
Time Estimate-a – 5 min.
TOPICS:
Payables Deferral Period
TOPICS:
Inventory Conversion Period