Select the correct option: 1. Which of the following statements is CORRECT? a. Commercial paper is a
Question:
Select the correct option:
1. Which of the following statements is CORRECT?
a. Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies.
b. Short-term debt is favored by firms because, while it is generally more expensive than long-term debt, it exposes the borrowing firm to less risk than long-term debt.
c. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
d. Commercial paper is typically offered at a long-term maturity of at least five years.
e. Trade credit is provided only to relatively large, strong firms.
2. Fireside Inc. has the following data. What is the firm's cash conversion cycle?
Inventory conversion period = 40 days
Average collection period = 18 days
Payables deferral period = 20 days
a. 33 days
b. 37 days
c. 38 days
d. 42 days
e. 49 days
3. Bubba Inc. had credit sales of $4,500,000 last year and its days sales outstanding was DSO = 30 days. What was its average receivables balance, based on a 365-day year?
a. $335,616
b. $352,397
c. $369,863
d. $389,836
e. $407,944
4. ABNA' cost of goods sold (COGS) average $2,000,000 per month, and it keeps inventory equal to 50% of its monthly COGS on hand at all times. Using a 365-day year, what is its inventory conversion period?
a. 11.7 days
b. 13.0 days
c. 14.4 days
d. 15.2 days
e. 16.7 days
5. Which of the following items should a company report directly in its monthly cash budget?
a. Cash proceeds from selling one of its divisions.
b. Accrued interest on zero coupon bonds that it issued.
c. New shares issued in a stock split.
d. New shares issued in a stock dividend.
e. Its monthly depreciation expense.
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws