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Exam 26: Short-Term Finance and Planning

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Question 21

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As of the beginning of the quarter,you have a cash balance of £250.During the quarter you pay your suppliers £310.Your trade receivables collections are £420.You also pay an interest payment of £30 and a tax bill of £180.In addition,you borrow £75.What is your cash balance at the end of the quarter?

A) £225
B) £245
C) £255
D) £275
E) £285

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

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Question 22

Multiple Choice

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LoDo has sales of £642,000 and average trade payables of £36,400.The cost of goods sold is equivalent to 65% of sales.How long does it take LoDo to pay its suppliers?

A) 11.46 days.
B) 13.45 days.
C) 20.69 days.
D) 26.18 days.
E) 31.85 days.

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

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Question 23

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A firm has an inventory turnover rate of 16,a receivables turnover rate of 21 and a payables turnover rate of 11.How long is the operating cycle?

Which one of the following statements concerning the cash cycle is correct?

A firm currently has a 36 day cash cycle.Assume that the firm changes its operations such that it decreases its receivables period by 4 days,increases its inventory period by 1 day and decreases its payables period by 2 days.What will the length of the cash cycle be after these changes?

Net working capital is defined as:

With a flexible policy with regard to short term financing,over a year a firm will have:

A manufacturing firm has a 90 day collection period.The firm produces seasonal merchandise and thus has the least sales during the first quarter of a year and the highest level of sales during the third quarter of a year.The firm maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters.The firm is most apt to face a cash-out situation in:

A _____ issued by a bank is a promise by that bank to make a loan if certain conditions are met.

Which of the following is not included in current liabilities?

The inventory turnover for the Lambkin Company was 8 times and its days in receivables was 55.The average payables deferral period (or turnover) was 7.5.What is the cash cycle for Lambkin given a 365-day year?

Flexible short-term financial policies tend to:

An increase in which one of the following is most apt to be an indicator of a trade receivables policy that is too restrictive?

The inventory turnover for the Lambkin Company was 8 times and its days in receivables was 55.What is the operating cycle for Lambkin given a 365-day year?

Birds Unlimited has a 45 day trade payables period.The firm has expected sales of £1,800,£2,100,£2,400 and £2,800,respectively,by quarter for the next calendar year.The cost of goods sold for a quarter is equal to 65% of the next quarter sales.What is the amount of the projected cash disbursements for trade payables for Quarter 2 of the next year? Assume that a year has 360 days.

Dallas and More (D&M) sells its inventory in 82 days on average.Its average customer charges his purchase on a credit card whereby payment is received in ten days.On the other hand,D&M takes 56 days on average to pay for its purchases.Given this information,what is the length of D&M's operating cycle?

Weisbro and Sons purchase its inventory one quarter prior to the quarter of sale.The purchase price is 60% of the sales price.The trade payables period is 60 days.The trade payables balance at the beginning of quarter one is £27,500.What is the amount of the expected disbursements for quarter two given the following expected quarterly sales? Assume that a year has 360 days. Quarter l $\quad\quad\quad\quad £ 31,000$ Quarter 2 $\quad\quad\quad\quad £ 34,000$ Quarter 3 $\quad\quad\quad\quad £ 42,000$ Quarter 4 $\quad\quad\quad\quad £ 51,000$

The manager responsible for the accounting information concerning cash flows is the:

A flexible short-term financial policy:

Restrictive short-term financial policies regarding current asset management include three basic actions.List and briefly describe each action.