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Exam 17: Working Capital Management

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Question 21

Multiple Choice

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The transaction motive refers to the need to hold cash:

A) as a safety margin.
B) for unforeseen investment opportunities.
C) for daily operations.
D) as a financial reserve.
E) for emergency situations

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

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Question 22

Multiple Choice

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On April 14,McCallister's purchased $7,800 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

A) $200; 14.95
B) $156; 44.59
C) $400; 14.95
D) $400; 27.38
E) $400; 44.59

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

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Question 23

Multiple Choice

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As of Monday morning,the ledger balance and the available balance for a firm was $2,100.During the day,the firm wrote three checks in the amounts of $674,$420,and $236.The firm deposited a check for $387 and a check for $638.What is the amount of the collection float as of the end of the day assuming none of these checks have cleared?

The Dog House offers credit terms of 2/7,net 20 to all of its customers.Historically,93 percent of its customers take advantage of the discount.What is the firm's average collection period?

Which of these practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

For which one of the following instruments does a bank guarantee payment by the buyer?

Electronics and More offers credit terms of 2/7,net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Harvest Foods generally receives three checks a month in the amounts of $38,950,$16,750,and $63,800.It takes an average of one day for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float? Assume a 30-day month.

On any given day,Althea's receives and deposits numerous checks worth an average combined total of $4,328.The funds from these checks are generally available in 1.2 days.Every day the firm mails out checks totaling $3,010 that generally take 2.5 days to clear the bank.What is the amount of the disbursement float if the opening bank balance was $828 with no outstanding items?

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Alicia wrote a check for $18 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Which statement is correct?

Which of these would be the most common evidence of indebtedness when a sale is made on open account?

A (n) _____ is a subsidiary of a firm that exists solely to handle the credit functions of the parent company.

Which one of the following is most commonly used in international trades?

Stinkey sells 2,250 units of its perfume collection each year at a price per unit of $199.All sales are on credit with terms of 2/7,net 30.The discount is taken by 91 percent of the customers.What is the average amount of the company's accounts receivable?

How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Which one of the following best illustrates the concept of derived demand?

Used Furniture sells 1,330 sofas a year at an average price per sofa of $549.The carrying cost per unit is $31.60.The company orders 75 sofas at a time and has a fixed order cost of $69 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately,the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?