d. total fixed costs are constant over the relevant range, but fixed costs per unit vary directly with the cost driver or volume 21. Which of the following assets is included in the adjustment of net income to obtain cash flow from operating activities? a. Account receivable b. Inventory c. Prepaid expenses d. All of the above 22. The statement of cash flows does not include which of the following sections? a. Cash flow from operating activities b. Cash flows from sales activities C. Cash flows from investing activities d. Cash flows from financing activities 23. A firm's purchase of plant and equipment would be considered a a. Use of cash for financing activities b. Use of cash for operating activities c. Source of cash for investing activities d. Use of cash for investing activities 24. Which of the following is an inflow of cash? a. Funds spent in normal business operations b. The purchase of a new factory. c. The sale of the firm's bonds d. Payment of long-term liabilities 25. Cash flows from financing activities include all of the following except a. Sales of long-lived assets such as property, plant and equipment, intangibles, and other long-term asset. b. Proceeds from borrowing (short-term and long-term) c. Repurchase of a firm's own shares d. Payment of dividends 26. Working capital is important for all the following reasons except that is a. consists of a large portion of a firm's total assets affects a firm's liquidity and profitability C. consumes a small portion of the financial manager's time d. consist of those assets that are most manageable. 27. Net working capital is a firm's a. current assets b. current liabilities c. current assets less current liabilities d. total assets less total liabilities 28. It measures the time period that elapses from the date an inventory item is purchased until the firm collects the cash from its sale. a. Cash Collection cycle b. Operating cycle C. Working capital cycle d. Revenue cycle29. Wolverine Inc. has the following financial information: Annual Sales P 5,000,000 Cost of Goods Sold 3,500,000 Average Inventories 1,200,000 Average Accounts Receivable 1,400,000 Average Accounts Payable 1,100,000 Assuming that all sales are on credit, what will be the firm's operating cycle? a. 198.35 days b. 256.09 days C. 227.34 days d. 127.64 days 30. What will be the firm's cash conversion cycle? a. 141.74 days b. 187.40 days c. 112.63 days d. 98.34 days 31. Factoring is a credit management a. Which involves the outright sale of accounts receivable to a factor b. Which should be used only as a last resort when all other sources of financing fail c. In which the factor is free to request new receivables for those accounts it deems uncollectible d. In which the cash advances from the factor is essentially a loan secured by the eventual collection of the receivables factored. 32. For which type of loan is the stated interest rate equal to the effective interest rate? Installment loan b. Discounted loan c. Simple interest loan d. Revolving credit arrangement 33. A company has just borrowed P2 million from a bank. The stated rate of interest is 10%, If the loan is discounted and is repayable in one year, the effective rate on the loan is approximately a. 8.89% b. 9.09% C. 10.00% d. 11.11% 34. Harry Company's bank requires a compensating balance of 20% on a P100,000 loan, If the stated interest on the loan is 7%, what is the effective cost of the loan? a. 5.83% b. 7.00% C. 8.40% d. 8.75% 35. Statement 1. Under the pledging arrangement, the borrower simply pledges or assigns accounts receivable as collateral for a loan obtained from either a commercial bank or a finance company. Statement 2. Factoring is a credit management which involves the outright sale of accounts receivable to a factor. a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is true