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Chapter 20
Credit and Inventory Management
Multiple Choice Questions
1.
Blackwell Brothers sells men's suits. The store offers a 1 percent discount if
payment is received within 10 days. Otherwise, payment is due within 30
days. This credit offering is referred to as the:
2.
Jillian was recently hired by a major retail store. Her job is to determine the
probability that individual customers will fail to pay for their charge sales.
Jillian's job best relates to which one of the following?
3.
Town Hardware sells goods on credit with payment due 30 days after
purchase. If payment is not received by the 30th day, the store mails a
friendly reminder to the customer. If payment is not received by the 45th day,
the store calls the customer and requests payment and also stops offering
credit to that customer. These procedures are referred to as the store's:
4.
Phil's Print Shop grants its customers the right to pay for their print jobs
within 30 days of the date of service. This 30-day period is referred to as
the:
5.
Scott purchased a shovel, a rake, and a wheelbarrow from The Local
Hardware Store yesterday. Today, the store issued a bill for these items and
mailed it to Scott. What is the name given to this bill?
6.
Geoff Industries offers its credit customers a 2 percent discount if they pay
within 10 days. This discount is referred to as a:
7.
Any written proof that a customer owes you money for goods or services
provided is referred to as a(n):
8.
You are viewing a graph which compares costs with the amount of credit
extended. Both the carrying costs and the opportunity costs of credit are
depicted. What is the function called that represents the summation of
these carrying and opportunity costs?
9.
Assume that RSF is a wholly-owned subsidiary of the Rolled Steel
Company. RSF provides credit financing solely for large ticket items
purchased from the Rolled Steel Company. Which one of the following
terms describes RSF?
10.
The basic factors to be evaluated in the credit evaluation process, the five
Cs of credit, are:
11.
Roger's Home Appliances offers credit to customers it deems worthy of this
privilege. To determine if a customer is worthy, the firm computes a
numerical value which is used to estimate the probability that the customer
will default if credit is granted to them. The process of computing this
numerical value is referred to as:
12.
You have recently been hired as an accounting intern for Jefferson Mills.
The job that you have been assigned for today is to compile a spreadsheet
that has six columns. The column headings are: Invoice #; Customer name;
< 30 days; 31-60 days; 61-90 days; > 90 days. You are to list every unpaid
invoice by customer name with the amount owed entered into the
appropriate column for the number of days between the sale date and
today. Once you have completed that, you are to sort the report by customer
name and then total the amounts listed in each column. What is this report
called?
13.
Bill is in charge of the inventory for Home Builder's Supply. As an inventory
item gets low, he is to restock the item by a quantity that minimizes the
total inventory costs for that item. What is this restocking quantity called?
14.
Allison has developed a set of procedures for determining the amount of
each raw material that she needs to have in inventory if she is to keep her
firm's assembly lines operating efficiently. These procedures are commonly
referred to by which one of the following terms?
15.
Which one of the following is a system for managing demand-dependent
inventories that minimizes the inventory levels of a firm?
16.
The terms of sale generally include which of the following?
I. type of credit instrument
II. cash discount
III. credit period
IV. discount period
17.
What is the primary purpose of credit analysis?
18.
The period of time that extends from the day a credit sale is made until the
day the bank credits a firm's account with the payment for that sale is
known as the _____ period.
19.
Which one of the following will increase a firm's investment in accounts
receivables?
20.
A firm's total investment in receivables depends primarily on the firm's:
