Question 1

A firm following a conservative approach to working capital policy will finance __________ of the fixed assets,__________ of the permanent current assets,and __________ of temporary current assets are financed with long term capital.

Accepted Answer

A)   all; some; none
B)   none; all; all
C)   all; none; none
D)   all; all; some
E)   some; all; allF) A) and D)
G) A) and E)

Question 2

The average length of time required to convert materials into finished products and sell that product is called the __________.

Accepted Answer

A)   cash conversion cycle
B)   inventory conversion period
C)   receivables collection period
D)   payables deferral period
E)   days sales outstandingF) B) and E)
G) B) and D)

Question 3

You have recently been hired to improve the performance of Multiplex Corporation which has been experiencing a severe cash shortage.As one part of your analysis,you want to determine the firm's cash conversion cycle.Using the following information and a 360-day year,what is your estimate of the firm's current cash conversion cycle? Current inventory = $120,000
Annual sales = $600,000
Accounts receivable = $160,000
Accounts payable = $25,000
Total annual purchases = $360,000
Purchases credit terms: net 30 days
Receivables credit terms: net 50 days

Accepted Answer

A)   49 days
B)   143 days
C)   100 days
D)   168 days
E)   191 daysF) A) and E)
G) B) and D)

Question 4

The sale of inventory at cost for cash will increase the current assets for a firm.

Accepted Answer

A) True 
 B)False

Question 5

A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing.

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

The cash conversion cycle is the length of time from the __________ raw materials to manufacture a product until the __________ of accounts receivable associated with the sale of the product.

Accepted Answer

A)   ordering of; creation
B)   ordering of; collection
C)   payment for; creation
D)   payment for; collection
E)   none of the aboveF) C) and D)
G) All of the above

Question 8

A high current ratio insures that a firm will have the cash required to meet its needs.

Accepted Answer

A) True 
 B)False

Question 9

Firms following a relaxed current asset policy are likely to __________ holdings of cash and have a __________ credit policy on sales.

Accepted Answer

A)   have large; conservative
B)   minimize the; conservative
C)   have large; liberal
D)   minimize the; liberal
E)   have zero; liberalF) B) and E)
G) C) and D)

Question 10

A firm following an aggressive approach to working capital policy will finance all of the fixed assets with __________,and some of the firm's permanent current assets will be financed with __________.

Accepted Answer

A)   short-term nonspontaneous sources of funds; long term capital
B)   commercial paper; long term capital
C)   long term capital; short-term nonspontaneous sources of funds
D)   long term capital; corporate bonds
E)   short-term nonspontaneous sources of funds; corporate bondsF) All of the above
G) C) and D)

Question 11

The fact that no explicit interest cost is paid on accruals and that the firm can exercise considerable control over their level makes accruals an attractive source of additional funding.

Accepted Answer

A) True 
 B)False

Exam 14: Working Capital Policy

The fact that no explicit interest cost is paid on accruals and that the firm can exercise considerable control over their level makes accruals an attractive source of additional funding.

Correct Answer
verified

The cash conversion cycle is the length of time from the raw materials to manufacture a product until the of accounts receivable associated with the sale of the product.

Correct Answer
verified

The sale of inventory at cost for cash will increase the current assets for a firm.

Correct Answer
verified

Firms following a relaxed current asset policy are likely to holdings of cash and have a credit policy on sales.

Correct Answer
verified

Correct Answer
verified

The average length of time required to convert materials into finished products and sell that product is called the __________.

Correct Answer
verified

A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing.

Correct Answer
verified

A high current ratio insures that a firm will have the cash required to meet its needs.

Correct Answer
verified

A firm following an aggressive approach to working capital policy will finance all of the fixed assets with ,and some of the firm's permanent current assets will be financed with .

Correct Answer
verified

A firm following a conservative approach to working capital policy will finance of the fixed assets, of the permanent current assets,and __ of temporary current assets are financed with long term capital.

Correct Answer
verified

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.

Correct Answer
verified

Exam 14: Working Capital Policy

The fact that no explicit interest cost is paid on accruals and that the firm can exercise considerable control over their level makes accruals an attractive source of additional funding.

Correct AnswerverifiedShow Answer

The cash conversion cycle is the length of time from the __________ raw materials to manufacture a product until the __________ of accounts receivable associated with the sale of the product.

Correct AnswerverifiedShow Answer

The sale of inventory at cost for cash will increase the current assets for a firm.

Correct AnswerverifiedShow Answer

Firms following a relaxed current asset policy are likely to __________ holdings of cash and have a __________ credit policy on sales.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The average length of time required to convert materials into finished products and sell that product is called the __________.

Correct AnswerverifiedShow Answer

A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing.

Correct AnswerverifiedShow Answer

A high current ratio insures that a firm will have the cash required to meet its needs.

Correct AnswerverifiedShow Answer

A firm following an aggressive approach to working capital policy will finance all of the fixed assets with __________,and some of the firm's permanent current assets will be financed with __________.

Correct AnswerverifiedShow Answer

A firm following a conservative approach to working capital policy will finance __________ of the fixed assets,__________ of the permanent current assets,and __________ of temporary current assets are financed with long term capital.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct Answer
verified

The cash conversion cycle is the length of time from the raw materials to manufacture a product until the of accounts receivable associated with the sale of the product.

Correct Answer
verified

Correct Answer
verified

Firms following a relaxed current asset policy are likely to holdings of cash and have a credit policy on sales.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A firm following an aggressive approach to working capital policy will finance all of the fixed assets with ,and some of the firm's permanent current assets will be financed with .

Correct Answer
verified

A firm following a conservative approach to working capital policy will finance of the fixed assets, of the permanent current assets,and __ of temporary current assets are financed with long term capital.

Correct Answer
verified

Correct Answer
verified