Finance Chapter 19 2 Firms That Continually Invest Nontrivial Amounts

52.

Firms that continually invest in nontrivial amounts of marketable securities may be guilty of:

53.

What happens to a firm whose uses of cash exceed its sources of cash during an accounting period?

54.

Which one of the following would not be considered a use of cash?

55.

Avatar Corp solves its cash shortage by paying its bills a week late but loses a 1% discount by doing so. This is equivalent to

borrowing at an annual interest rate of:

56.

A firm starts with $5,000 of accounts receivables and ends the period with $4,000 of receivables. If it collected $4,000 of

receivables during the period, what was the amount of sales?

57.

A firm had $2,800 cash at the beginning of the period. During the period, the firm collected $1,600 in receivables, paid

$1,850 to supplier, had credit sales of $4,200, and incurred cash expenses of $2,300. What was the cash balance at the end of

the period?

58.

Which one of the following is least likely to be correct for a firm that repeatedly stretches its payables?

59.

A firm must decide between borrowing from a bank at 12% interest or stretching its payables for one quarter. If it stretches

the payables it will forgo a 2% discount for timely payment. Based solely on cash flows, which is the cheaper solution?

Annual cost of foregone discount = 1.024 − 1 = 8.24%

60.

A firm starts the week with payables of $172,000. It pays $80,000 of outstanding bills, and purchases $44,000 of raw

materials on one month’s credit. What is the level of payables at the end of the week?

61.

A firm starts the week with payables of $172,000, it pays $$80,000 of outstanding bills, and purchases $44,000 of raw

materials on one month’s credit. What is the change in its cash balance over the week?

62.

Which of the following will not reduce an imminent cash shortage?

63.

Zeta Stores places orders for 60% of the sales forecast in the next month and for 40% of the sales forecast for the following

month. It pays for these goods with a 2-month delay. If sales for August are forecast at $10 million and sales for September

and October are forecast at $12 million, what will be the forecast cash outflow in September?

64.

Zeta Stores places orders for 60% of the sales forecast in the next month and for 40% of the sales forecast for the following

month. It pays for these goods with a 1-month delay? If sales for August are forecast at $10 million and sales for September

and October are forecast at $12 million, what will be the forecast cash outflow in September?

65.

A firm that stretches its payables gains an extra 1 month before it needs to pay for its purchases of raw materials but it loses a

2% discount for prompt payment. This is like borrowing at an effective annual interest rate of:

66.

Which statement does not correctly describe short-term financial decisions?

67.

There are three steps to constructing a cash budget. Which of the following is not one of those steps?

68.

Before settling on a final short-term financial plan, the manager needs to ask several questions. Which is the odd man out?

69.

Clopton Inc. forecasts cash sales of $18 million in January, $23 million in February and $25 million in March. Credit sales in

these three months are forecast at $80 million, $110 million and $145 million. On average 50% of credit sales are paid for in

the current month, 30% in the next month, and the remainder in the following month. What is the expected cash inflow in

March?

70.

When managers are continually short-term lenders, they are said to follow a:

71.

When the length of the financing is directly related to the life of the asset being financed, the firm is said to follow a:

72.

Which one of these is most associated with a disadvantage of the relaxed strategy of long– versus short-term financing?

73.

Which one of the following is a use of cash?

74.

Which of the following would increase the firm’s cash balance?

75.

Managers are alerted to projected cash shortages by means of the:

76.

In the preparation of cash budgets, capital expenditures are:

77.

Managers who “stretch their payables” are attempting to:

78.

Which one of the following would not be included as a source of short-term financing?

79.

For a recent period, a firm collected $38,200 on accounts receivable, paid $19,700 to suppliers on trade credit, paid $12,000

in cash expenses, purchased for cash a $42,000 piece of equipment that will be depreciated straight-line to zero over 4 years,

and had $59,000 of sales of which 15% were cash sales. The firm also paid $13,500 in taxes and interest. The beginning cash

balance was $11,300. How much did the firm need to borrow in order to maintain a minimum cash balance of $10,000?

80.

The Boat Works started the month with $1.28 million in accounts receivable. Sales for the month were $3.4 million. The

firm collects 35% of its sales in the month of sale with the remainder paid the following month. What is the accounts

receivable balance at month end?

81.

The Boat Works started the month with $3.21 million in accounts receivable. Sales for the month were $7.84 million. The

firm collects 18% of its sales in the month of sale with the remainder paid the following month. What is the accounts

receivable balance at month end?

82.

A firm that follows a relaxed strategy toward the total capital requirement will be a:

83.

Issuing additional long-term debt of $5 million and buying new long-term assets worth $4 million and short-term assets of $1

million will result in a net cash flow of:

84.

A firm has $50 million and $60 million credit sales during the first two quarters of the year. Eighty percent of the receivables

are collected in the same quarter and the balance in the next quarter. What will be the total collection for the firm in the

second quarter?

Chapter 19 Test bank – Static Summary