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Here are some important figures from the budget of Wexter Enterprises for the second quarter of 2010: Here are some important figures from the budget of Wexter Enterprises for the second quarter of 2010: The company predicts that 2 percent of its credit sales will never be collected, 45 percent of its sales will be collected in the month of sale, and the remaining 53 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2010, credit sales were $387,000 and credit purchases were $279,500. What is the ending cash balance for April if the beginning cash balance was $97,500? A) $87,410 B) $90,060 C) $92,800 D) $94,440 E) $97,230 The company predicts that 2 percent of its credit sales will never be collected, 45 percent of its sales will be collected in the month of sale, and the remaining 53 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2010, credit sales were $387,000 and credit purchases were $279,500. What is the ending cash balance for April if the beginning cash balance was $97,500?


A) $87,410
B) $90,060
C) $92,800
D) $94,440
E) $97,230

F) A) and B)
G) A) and C)

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Jackson's, Inc. currently has an operating cycle of 154 days and a cash cycle of 38 days. The firm is implementing some changes which will reduce the inventory period by 16 days and decrease the receivables period by 4 days on average. The accounts payable period will be decreased by 3 days. How many days will be in the new cash cycle once all of these changes become effective?


A) 15 days
B) 18 days
C) 21 days
D) 55 days
E) 61 days

F) A) and C)
G) A) and E)

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Zeigler Marina has a line of credit with a local bank that permits it to borrow up to $1.3 million at any time. The interest rate is 0.57 percent per month. The bank charges compound interest and also requires that 5 percent of the amount borrowed be deposited into a noninterest-bearing account. What is the effective annual interest rate on this loan?


A) 6.68 percent
B) 7.43 percent
C) 7.74 percent
D) 7.80 percent
E) 7.91 percent

F) A) and B)
G) None of the above

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Webster's currently has an inventory turnover of 15.7, a payables turnover of 9.6, and a receivables turnover of 8.4. How many days are in the cash cycle?


A) 28.68 days
B) 33.70 days
C) 56.51 days
D) 84.39 days
E) 104.72 days

F) A) and B)
G) A) and C)

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Black Water Mills is operating at its optimal point. Which one of the following conditions exists given this firm's operating status?


A) Carrying costs exceed shortage costs
B) Carrying costs are equal to zero
C) Both carrying costs and shortage costs are at their minimum levels
D) Shortage costs are equal to zero
E) Shortage costs equal carrying costs

F) C) and D)
G) B) and D)

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Which of the following are inversely related to increases in a firm's current assets? I. re-order costs II) shortage costs III) restocking costs IV) carrying costs


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

F) D) and E)
G) B) and E)

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Erin's purchases from suppliers in a quarter are equal to 67 percent of the next quarter's forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 30 percent of sales, and interest and dividends are $90 per quarter. No capital expenditures are planned. Projected quarterly sales are: Erin's purchases from suppliers in a quarter are equal to 67 percent of the next quarter's forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 30 percent of sales, and interest and dividends are $90 per quarter. No capital expenditures are planned. Projected quarterly sales are: Sales for the first quarter of the following year are projected at $1,510. What is the amount of the firm's total cash outlay for the third quarter? A) $1,990 B) $1,420 C) $1,480 D) $1,530 E) $1,550 Sales for the first quarter of the following year are projected at $1,510. What is the amount of the firm's total cash outlay for the third quarter?


A) $1,990
B) $1,420
C) $1,480
D) $1,530
E) $1,550

F) B) and D)
G) None of the above

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Kurt's Enterprises has a receivables turnover rate of 11.8, a payables turnover rate of 12.4, and an inventory turnover rate of 15.6. What is the length of the firm's operating cycle?


A) 24.89 days
B) 39.80 days
C) 54.33 days
D) 72.56 days
E) 83.77 days

F) B) and C)
G) All of the above

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The Road Kill Restaurant has the following current account values for the year. These accounts represent a net _____ of cash for the year in the amount of _____. The Road Kill Restaurant has the following current account values for the year. These accounts represent a net _____ of cash for the year in the amount of _____. A) source; $3,100 B) source; $4,700 C) use; $3,100 D) use; $3,800 E) use; $4,700


A) source; $3,100
B) source; $4,700
C) use; $3,100
D) use; $3,800
E) use; $4,700

F) A) and B)
G) B) and D)

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The local toy store has to restock a popular video game every 4 days as it completely sells out in that period of time. What is the inventory turnover rate for this game?


A) 4.00 times
B) 4.25 times
C) 57.14 times
D) 90.00 times
E) 91.25 times

F) A) and B)
G) C) and E)

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Which one of the following will increase the operating cycle?


A) Decreasing the accounts payable period
B) Increasing the accounts payable turnover rate
C) Increasing the cash cycle
D) Decreasing the accounts receivable turnover rate
E) Decreasing the inventory period

F) A) and B)
G) C) and E)

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Harter's Meats has an average collection period of 36 days and factors all of its receivables immediately at a 1.2 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?


A) 12.88 percent
B) 12.94 percent
C) 12.97 percent
D) 13.02 percent
E) 13.07 percent

F) A) and E)
G) B) and E)

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Which one of the following is most apt to decrease the accounts receivable period?


A) Increasing the time granted to customers to pay for purchases
B) Shortening the cash cycle
C) Increasing the discount for cash payment
D) Selling inventory slower
E) Paying suppliers faster

F) None of the above
G) A) and E)

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The operating cycle is equal to which one of the following?


A) Inventory period plus the accounts payable period
B) Accounts receivable period plus the cash cycle
C) Inventory period minus the accounts payable period plus the accounts receivable period
D) Accounts receivable period plus the inventory period
E) Inventory period plus the cash cycle

F) None of the above
G) B) and E)

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Pennington's has annual sales of $1.46 million. The cost of goods sold is equal to 78 percent of sales. The firm has an average accounts receivable balance of $148,900 and an average accounts payable balance of $163,500. How many days on average does it take the firm to pay its suppliers?


A) 40.88 days
B) 47.72 days
C) 49.81 days
D) 52.40 days
E) 56.67 days

F) A) and B)
G) D) and E)

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The Corner Store is a small-sized, general store which stocks a minimal level of basic supplies and offers gasoline to a rural community. Which one of the following types of credit is probably best-suited for financing this store's inventory?


A) Trust receipt financing
B) Receivables factoring
C) Field warehousing
D) Blanket inventory lien
E) Receivables assignment

F) A) and E)
G) A) and C)

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To ensure an unsecured line of credit is used solely for short-term purposes, the loan arrangement frequently includes which one of the following?


A) Cleanup period
B) Grace period
C) Revolver
D) Factoring arrangement
E) Lien on the borrower's inventory

F) A) and E)
G) B) and E)

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The Supply Hut has the following estimated sales: The Supply Hut has the following estimated sales: The accounts receivable period is 60 days. How much should the firm expect to collect in May? A) $18,600 B) $19,900 C) $21,200 D) $21,450 E) $24,300 The accounts receivable period is 60 days. How much should the firm expect to collect in May?


A) $18,600
B) $19,900
C) $21,200
D) $21,450
E) $24,300

F) C) and D)
G) B) and E)

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The accounts receivable period is the time that elapses between the _____ and the _____.


A) purchase of inventory; payment to the supplier
B) purchase of inventory; collection of the receivable
C) sale of inventory; payment to supplier
D) sale of inventory; collection of the receivable
E) sale of inventory: billing to customer

F) B) and C)
G) A) and B)

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The accounts receivable turnover rate for Kitlinger's Men's Wear has gone from an average of 10.6 times to 10.1 times per year. How has this change affected the firm's accounts receivable period?


A) Decrease of 1.71 days
B) Increase of 1.71 days
C) Decrease of 2.28 days
D) Increase of 2.28 days
E) Increase of 2.97 days

F) B) and E)
G) A) and D)

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