QUESTION 9

1. Other things held constant, what happens with a short CCC?

   	a.	The firms working capital management is more effective.
   	b.	The firms administrative costs are more effective.
   	c.	The firms inventory management is more effective..
   	d.	The firms working capital management is less effective.

1 points

QUESTION 10

1. Which statement best describes short-term versus long-term financing?

   	a.	The flexibility, cost, and riskiness of short-term versus long-term credit are dependent on the type of credit that is actually used.
   	b.	A short-term loan can usually be obtained more quickly than a long-term loan, but the penalty for early repayment of a short-term loan is normally significantly higher than that for a long-term loan.
   	c.	Flexibility is an advantage of short-term credit, but this is somewhat offset by the high flotation costs associated with the need to repeatedly renew short-term credit.
   	d.	Short-term debt is often less costly than long-term debt, and the major reason for this is that short-term debt exposes the borrowing firm to much less risk than long-term debt.

1 points

QUESTION 11

1. ABC Inc. has a 59-day average payables period. The account payables are $2,737.50 at the beginning and $3,589.50 at the end of the covering year. What is the annual cost of goods sold? Use a 365-day year when calculating the APP. (hint: use average account payables)

   	a.	$17,265
   	b.	$18,992
   	c.	$20,123
   	d.	$19,571

2 points

QUESTION 12

1. Branch Corp.s total assets at the end of last year were $315,000 and its net income after taxes was $22,750. What was its return on total assets?

   	a.	7.58%
   	b.	8.36%
   	c.	7.96%
   	d.	7.22%

2 points

QUESTION 13

1. ABC Co. is planning its operations for next year, and Ronnie Clayton, the CEO, wants you to forecast the firms additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.

   Last years sales = S0	$350		Last years accounts payable	$40
   Sales growth rate = g	30%		Last years notes payable (to bank)	$50
   Last years total assets = A0	$500		Last years accruals	$30
   Last years profit margin = M	5%		Target payout ratio	60%

   	a.	$113.9
   	b.	$119.9
   	c.	$108.2
   	d.	$102.8

2 points

QUESTION 14

1. Outdoor Adventures Inc. is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):

   	Peak	Off-Peak
   Cash	$ 50	$ 30
   Marketable securities	0	20
   Accounts receivable	40	20
   Inventories	100	50
   Net fixed assets	500	500
   Total assets	$690	$620
   Spontaneous liabilities	$ 30	$ 10
   Short-term bank debt	50	0
   Long-term debt	300	300
   Common equity	310	310
   Total claims	$690	$620

   What can we conclude from this data?

   	a.	Ski Liftss working capital financing policy calls for exactly matching asset and liability maturities.
   	b.	Ski Lifts follows a relatively conservative approach to working capital financing; that is, some of its short-term needs are met by permanent capital.
   	c.	Without income statement data, we cannot determine the aggressiveness or conservatism of the companys working capital financing policy.
   	d.	Ski Liftss working capital financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt.

2 points

QUESTION 15

1. On average, Bragg Inc. has COGS of $2,000,000 per month. It keeps inventory equal to 60% of its monthly sales on hand at all times. Based on using a 365-day year, what is the inventory conversion period?

   	a.	18.25
   	b.	14.4
   	c.	13.0
   	d.	12.2