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Exam 7: Current Asset Management

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Question 1

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Minimizing cash balances can improve overall corporate profitability.

A) True
B) False

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Question 2

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The amount of safety stock that a firm carries depends upon:

A) the unpredictability of inventory used.
B) the supply chain costs.
C) the riskiness of the storage facility.
D) the time period necessary to fill inventory orders.

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

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Question 3

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$\begin{array}{ll}\text { Warehouse space } & \$ 3.00 / \text { unit } \\\text { Material handling expense } & \$ 2.00 / \text { unit } \\\text { Insurance premium } & \$ 1.00 / \text { unit } \\\text { Total ordering cost } & \$ 150.00 / \text { per order }\end{array}$ -What is the economic order quantity?

$\begin{array}{ll}\text { Warehouse space } & \$ 3.00 / \text { unit } \\\text { Material handling expense } & \$ 2.00 / \text { unit } \\\text { Insurance premium } & \$ 1.00 / \text { unit } \\\text { Total ordering cost } & \$ 150.00 / \text { per order }\end{array}$ -What is the total cost of this inventory decision?

The economic order quantity helps a firm determine the most efficient size order to place.

The Grocery Chain (GC) reported an average inventory of $349,589 in its last annual report.If GC's annual Cost of Goods Sold was $5,800,000,approximately how many days did GC hold its inventory?

Cash flow does not rely on which of the following?

The "SWIFT" transfer system was developed to aid bank fund transfers within Canada.

How would electronic funds transfer affect the use of "float"?

If we assume that inventory is used up at a constant rate and safety stock is zero,the average inventory will be 1/2 the order size.

Inventories are usually the most liquid,but lowest-yielding,current asset of a firm.

Western Jet requires a minimum of 1,000,000 litres of jet fuel each month to keep its fleet of Airbus 380A passenger jets running.If Western Jet Operations Manager enters into a future contract to buy 750,000 litres of jet fuel in 90 days he is engaging in ____________.

Electronic funds transfer will likely increase the use of float.

Driveline Sprockets expects total sales of $20,000.The price per unit is $5.The firm estimates an ordering cost of $9.00 per order,with an inventory carrying cost of $1.20 per unit.What is the optimum order size?

Banker's Acceptances (BA) are issued in the _____________.A BA is guaranteed by a bank for a _________________.

A goal of cash management is to insure that the inflows and outflows of cash are synchronized.

AC's average AR is ______________.

Average daily remittances are $5 million,and "extended disbursement float" adds 5 days to the disbursement schedule,how much should the firm be willing to pay for a cash management system if the firm earns 12% on excess funds.

One of the first considerations in cash management is:

Eurodollars are Canadian dollars held on deposit by foreign banks.