The cash conversion cycle is the length of time from the __________ raw materials to manufacture a product until the __________ of accounts receivable associated with the sale of the product.

Question 1

1 / 1 pts

The average length of time required to convert a firm's receivables into cash is called the __________.

You Answered

  

cash conversion cycle

  

inventory conversion period

  

operating cycle

  

payables deferral period

Correct answer

  

days sales outstanding

Question 2

1 / 1 pts

The cash conversion cycle is the length of time from the __________ raw materials to manufacture a product until the __________ of accounts receivable associated with the sale of the product.

  

ordering of; creation

  

ordering of; collection

  

payment for; creation

Correct!

  

payment for; collection

  

none of the above

Question 3

1 / 1 pts

The average length of time required to convert materials into finished products and sell that product is called the __________.

  

cash conversion cycle

Correct!

  

inventory conversion period

  

receivables collection period

  

payables deferral period

  

days sales outstanding

Question 4

1 / 1 pts

Which of the following current liabilities are considered when calculating net working capital?

Correct!

  

Commercial paper issued to finance inventory.

  

Current maturities of long term debt.

  

Accounts receivable generated by sales on credit.

  

Inventory purchased with cash.

Question 5

1 / 1 pts

Firms following a relaxed current asset policy are likely to __________ holdings of cash and have a __________ credit policy on sales.

  

have large; conservative

  

minimize the; conservative

Correct!

  

have large; liberal

  

minimize the; liberal

  

have zero; liberal

Question 6

1 / 1 pts

The average length of time between the purchase of raw material and labor and the payment of cash for them is called the __________.

  

cash conversion cycle

  

inventory conversion period

  

receivables collection period

Correct!

  

payables deferral period

  

days sales outstanding

Question 7

0 / 1 pts

"Golden Fritter Corporation has a current ratio equal to three. If Golden Fritter issues $1,000,000 in long term bonds and uses the proceeds to purchase inventory, what will happen to the current ratio?"

Correct answer

  

Increase

You Answered

  

Decrease

  

Stay the same

  

"Change, but more information is required to determine the direction of the change."

  

None of the above.

Question 8

1 / 1 pts

"A firm following a conservative approach to working capital policy will finance __________ of the fixed assets, __________ of the permanent current assets, and __________ of temporary current assets are financed with long term capital."

  

all; some; none

  

none; all; all

  

all; none; none

Correct!

  

all; all; some

  

some; all; all

Question 9

0 / 1 pts

"On average, a firm sells $2,500,000 in merchandise a month. Its cost of goods sold equals 80 percent of sales, and it keeps inventory equal to one-third of its monthly cost of goods on hand at all times. If the firm analyzes its accounts using a 360-day year, what is the firm's inventory conversion period?"

  

360 days

  

180 days

  

30 days

You Answered

  

15 days

Correct answer

  

10 days

Sales per month = 2,500,000

CGS per month = 0.8 (2,500,000) = 2,000,000

ICP = 360 / [(12*2,000,000)/(1/3 * 2,000,000)] = 360/36 = 10

Question 10

0 / 1 pts

"Sea Sport Boat Corporation currently has a current ratio of two. If Sea Sport Boat Corporation increases current assets and current liabilities by the same amount, what will happen to their current ratio?"

You Answered

  

Increase

Correct answer

  

Decrease

  

Stay the same

  

"Change, but more information is required to determine the direction of the change."

  

None of these

Question 11

1 / 1 pts

"Gator Corporation currently has a current ratio equal to 0.65. If Gator Corporation increases current assets and current liabilities by the same amount, what will happen to their current ratio?"

Correct!

  

Increase

  

Decrease

  

Stay the same

  

"Change, but more information is required to determine the direction of the change."

  

None of these.

Question 12

0 / 1 pts

"You have recently been hired to improve the performance of Multiplex Corporation which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 360-day year, what is your estimate of the firm's current cash conversion cycle? Current inventory = $120,000. Annual sales = $600,000. Accounts receivable = $160,000. Accounts payable = $35,000. Total annual purchases = $360,000. Purchases credit terms: net 30 days. Receivables credit terms: net 50 days. "

  

195 days

  

177 days

You Answered

  

171 days

  

201 days

Correct answer

  

181 days

First solve for each individual period. Inventory Period=360/(360,000/120,000)=120 days Collections Period=360/(600,000/160,000)=96 days Payables Period=360/(360,000/35,000)=35 Days Then subtract payables period from the sum of the other two periods. =120+96-35=181

Question 13

1 / 1 pts

Which of the following is not a benefit of financial intermediation?

  

Reduced costs

  

Risk diversification

Correct!

  

Tax-free returns

  

Financial flexibility

Question 14

1 / 1 pts

Which form of informational market efficiency states that the market price of an asset contains all (historic, public, and private) of the pertinent information regarding the value of that security?

Correct!

  

Strong-form

  

Semistrong-form

  

Weak-form

  

Economic-form

Question 15

1 / 1 pts

"Certificates representing ownership in stocks of foreign companies, which are held in a trust bank located in the country the stock is traded are called __________."

  

Certificates of Ownership

  

Foreign Stock Funds

  

Mutual Funds

Correct!

  

American Depository Receipts

  

Investment Bankers

Question 16

1 / 1 pts

An agreement for the sale of securities in which the investment bank guarantees the sale by purchasing the securities from the issuer and then sells the securities in the primary is a(n) __________.

  

best efforts arrangement

  

guaranteed issue arrangement

Correct!

  

underwritten arrangement

  

private placement

  

None of the above

Question 17

1 / 1 pts

The market for newly issued stock by firms that were private is normally called

  

the seasoned equity market

  

the over-the-counter market

Correct!

  

the initial public offering market

  

the secondary market.

  

the stock market

Question 18

1 / 1 pts

Which of the following factors distinguish the banking system in the United States from banking structures in other countries?

  

Financial institutions in the United States are less regulated than their foreign counterparts.

Financial institutions in the United States have fewer limitations with regard to branching activity than their foreign counterparts

Correct!

Financial institutions in the United States have greater limitations with regard to non-banking business relationships than their foreign counterparts.

Financial institutions in the United States have been able to grow much larger in size than their foreign counterparts

  

Financial institutions in the United States dominate international banking activities

Question 19

1 / 1 pts

"Large, well-known public companies can reduce the time required to register and issue securities by using a(n)"

Correct!

  

Shelf registration

  

Subchapter S registration

  

Underwriting syndicate

  

Secondary market registration

  

"Red herring"" registration"

Question 20

0 / 1 pts

Which of the following is not a considered financial intermediary?

  

commercial bank

  

savings and loan association

  

pension fund

Correct answer

  

investment bank

You Answered

  

All of the above are financial intermediaries

Question 21

1 / 1 pts

"If a corporation that has been in business for many years (for example IBM) wants to raise funds by issuing new common stock, its stock will be sold in the __________ market."

Correct!

  

primary

  

secondary

  

debt

  

money

  

"In this case, the stock can be sold in more than one of the above markets"

Question 22

1 / 1 pts

"Treasury bills, which represent debt of the U.S. government, have maturities less than one year. As a result, in which type of financial market do outstanding, or already issued, Treasury bills trade?"

  

capital market

  

primary market

Correct!

  

money market

  

stock markets

  

Treasury bills trade in more than one of the above markets

Question 23

1 / 1 pts

Capital markets are markets for

  

commercial paper

  

short-term debt securities

Correct!

  

long-term debt securities

  

Treasury notes

  

none of these

Question 24

1 / 1 pts

The following balance sheet was provided. Calculate Net Working Capital using the numbers provided:

Cash	$50,000	Accounts Payable	$75,000
Accounts Receivable	$35,000	Wages Payable	$7,000
Inventory	$68,000	Short-Term Notes Payable	$12,000
Plant and Equipment:	$260,000	Long-Term Notes Payable	$220,000
Patent Rights:	$1,560,000	Owners Equity:	$2,402,000
Buildings:	$850,000	Common Stock:	$125,000

Correct!

  

$59,000

  

($18,000)

  

$0

  

$2,509,000

First Calculate Current Assets and Liabilities CA=50000+35000+68000=153000 CL=75000+7000+12000=94000 NWC=CA-CL=171000-94000=59000

First Calculate Current Assets and Liabilities CA=50000+35000+68000=153000 CL=75000+7000+12000=94000 NWC=CA-CL=171000-94000=59000

Question 25

1 / 1 pts

Carlton's Dance Studio has annual revenue of 108,000 and a days sales outsanding (DSO) of 39. If they can reduce their DSO to 30 without impacting their revenues, what is the net change in their accounts receivable account balance? They use a 360 day year for their calculations.

Correct!

  

$2,700 decrease

  

$2,700 increase

  

$831 increase

  

$831 decrease

First figure out current accounts receivable balance. =(108,000/360)*39 =11,700 Then figure out the new accounts receivable balance =(108,000/360)*30 = 9,000 Then subtract old from new. 9,000 - 11,700 = -2,700