Question

1. Which of the following is not a warning sign of potential liquidity problems?
a. Declines in working capital and daily cash flows
b. Increases in accounts receivable and longer collection periods
c. Decreases in debt and debt ratios
d. A buildup of inventory and declining inventory turnover

2. Which of the following is true?
a. Cash budgets should not be prepared with uncertain numbers.
b. Cash budgeting is a one-time process.
c. It is helpful to prepare separate cash budgets for alternative forecasts of key variables.
d. Cash budgets should not be used to evaluate the impact of different scenarios.

3. Which of the following usually does not increase as sales increase?
a. Cash
b. Accounts receivable
c. Trade credit
d. Short-term debt

Use the following information to answer questions 4 to 6 and practice problem 31.


4. What are the current ratio and quick ratio?
a. 4.57; 2.86
b. 3.56; 2.86
c. 3.56; 2.22
d. 2.22; 3.56

5. What is the average collection period (ACP)?
a. 227 days
a. 142 days
a. 150 days
a. 198 days

6. Calculate the operating cycle (OC) using COGS to calculate the inventory turnover ratio.
a. 1,025 days
b. 539 days
c. 996 days
d. 940 days

7. What is the period of time between the outflow of cash from buying raw materials and the collection of cash from selling finished goods?
a. Collection period
b. Inventory period
c. Net financing period
d. Operating cycle

8. The period of time between the purchase of raw materials and the sale of the finished goods produced from the raw materials is called the:
a. Collection period.
b. Inventory period.
c. Cash conversion cycle.
d. Operating cycle.

9. The period of time between the sale of finished goods on credit and the collection of the cash is called the:
a. Collection period.
b. Inventory period.
c. Net financing period.
d. Operating cycle.

10. What changes will occur if an inventory policy change causes a firm to hold fewer inventories?
a. The current ratio and the quick ratio will both decrease.
b. The current ratio will decrease but the quick ratio will be unchanged.
c. The inventory turnover ratio will decrease.
d. The average days’ revenues in inventory (ADRI) will increase.

11. What changes will occur if a payment policy change causes a firm to pay its suppliers faster?
a. The current ratio and the quick ratio will both decrease.
b. The current ratio will increase, but the quick ratio will be unchanged.
c. The payables turnover ratio will decrease.
d. The average days of sales in payables (ADSP) will decrease.

12. What changes will occur if a credit policy change causes a firm to allow its customers more time to pay their invoices?
a. The current ratio and the quick ratio will not change as accounts receivable changes to cash.
b. The current ratio will increase but the quick ratio will be unchanged.
c. The receivables turnover ratio will increase.
d. The average collection period (ACP) willdecrease.


$1.99
Sales0
Views98
Comments0
  • CreatedFebruary 25, 2015
  • Files Included
Post your question
5000