Question 1

Famous Farm's payables deferral period (PDP)  is 50 days (on a 365-day basis) , accounts payable are $100 million, and its balance sheet shows inventory of $125 million. What is the inventory turnover ratio?

Accepted Answer

A)   4.73
B)   5.26
C)   5.84
D)   6.42
E)   7.07F) A) and C)
G) A) and E)

Question 2

Net working capital is defined as current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 3

Brothers Breads has the following data. What is the firm's cash conversion cycle?   Inventory conversion period = 50days Average collection period = 17days Payables deferral period = 25day\begin{array}{lccc}	ext { Inventory conversion period  = }& 50 days\	ext { Average collection period  = }& 17 days \	ext { Payables deferral period = }& 25 day\end{array} Inventory conversion period =  Average collection period =  Payables deferral period = ​50days17days25day​

Accepted Answer

A)   31 days
B)   34 days
C)   38 days
D)   42 days
E)   46 days F) A) and E)
G) D) and E)

Question 4

The cash budget and the capital budget are handled separately, and although they are both important, they are developed completely independently of one another.

Accepted Answer

A) True 
 B)False

Question 5

Net working capital, defined as current assets minus the sum of payables and accruals, is equal to the current ratio minus the quick ratio.

Accepted Answer

A) True 
 B)False

Question 6

Short-term marketable securities are held for two separate and distinct purposes: (1) to provide liquidity as a substitute for cash and (2) as a non-operating investment. Marketable securities held while awaiting reinvestment are not available for liquidity purposes.

Accepted Answer

A) True 
 B)False

Question 7

A firm's collection policy, i.e., the procedures it follows to collect accounts receivable, plays an important role in keeping its average collection period short, although too strict a collection policy can reduce profits due to lost sales.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is most consistent with efficient inventory management? The firm has a

Accepted Answer

A)   low incidence of production schedule disruptions.
B)   below average total assets turnover ratio.
C)   relatively high current ratio.
D)   relatively low dso.
E)   below average inventory turnover ratio.F) C) and D)
G) D) and E)

Question 9

Accruals are "free" capital in the sense that no explicit interest must normally be paid on accrued liabilities.

Accepted Answer

A) True 
 B)False

Question 10

Whaley & Whaley has the following data. What is the firm's cash conversion cycle?
  Inventory conversion period = 41days Average collection period = 31days Payables deferral period = 38day\begin{array}{lccc}	ext { Inventory conversion period  = }& 41 days\	ext { Average collection period  = }& 31 days \	ext { Payables deferral period = }& 38 day\end{array} Inventory conversion period =  Average collection period =  Payables deferral period = ​41days31days38day​

Accepted Answer

A)   31 days
B)   34 days
C)   37 days
D)   41 days
E)   45 days F) A) and C)
G) None of the above

Question 11

Suppose a firm changes its credit policy from 2/10 net 30 to 3/10 net 30. The change is meant to meet competition, so no increase in sales is expected. The average accounts receivable balance will probably decline as a result of this change.

Accepted Answer

A) True 
 B)False

Exam 21: Supply Chains and Working Capital Management

Net working capital, defined as current assets minus the sum of payables and accruals, is equal to the current ratio minus the quick ratio.

Correct Answer
verified

The cash budget and the capital budget are handled separately, and although they are both important, they are developed completely independently of one another.

Correct Answer
verified

A firm's collection policy, i.e., the procedures it follows to collect accounts receivable, plays an important role in keeping its average collection period short, although too strict a collection policy can reduce profits due to lost sales.

Correct Answer
verified

Suppose a firm changes its credit policy from 2/10 net 30 to 3/10 net 30. The change is meant to meet competition, so no increase in sales is expected. The average accounts receivable balance will probably decline as a result of this change.

Correct Answer
verified

Short-term marketable securities are held for two separate and distinct purposes: (1) to provide liquidity as a substitute for cash and (2) as a non-operating investment. Marketable securities held while awaiting reinvestment are not available for liquidity purposes.

Correct Answer
verified

Net working capital is defined as current assets divided by current liabilities.

Correct Answer
verified

Brothers Breads has the following data. What is the firm's cash conversion cycle? $\begin{array}{lccc}\text { Inventory conversion period = }& 50 days\\\text { Average collection period = }& 17 days \\\text { Payables deferral period = }& 25 day\end{array}$

Correct Answer
verified

Which of the following statements is most consistent with efficient inventory management? The firm has a

Correct Answer
verified

Famous Farm's payables deferral period (PDP) is 50 days (on a 365-day basis) , accounts payable are $100 million, and its balance sheet shows inventory of $125 million. What is the inventory turnover ratio?

Correct Answer
verified

Accruals are "free" capital in the sense that no explicit interest must normally be paid on accrued liabilities.

Correct Answer
verified

Whaley & Whaley has the following data. What is the firm's cash conversion cycle? $\begin{array}{lccc}\text { Inventory conversion period = }& 41 days\\\text { Average collection period = }& 31 days \\\text { Payables deferral period = }& 38 day\end{array}$

Correct Answer
verified

Exam 21: Supply Chains and Working Capital Management

Net working capital, defined as current assets minus the sum of payables and accruals, is equal to the current ratio minus the quick ratio.

Correct AnswerverifiedShow Answer

The cash budget and the capital budget are handled separately, and although they are both important, they are developed completely independently of one another.

Correct AnswerverifiedShow Answer

A firm's collection policy, i.e., the procedures it follows to collect accounts receivable, plays an important role in keeping its average collection period short, although too strict a collection policy can reduce profits due to lost sales.

Correct AnswerverifiedShow Answer

Suppose a firm changes its credit policy from 2/10 net 30 to 3/10 net 30. The change is meant to meet competition, so no increase in sales is expected. The average accounts receivable balance will probably decline as a result of this change.

Correct AnswerverifiedShow Answer

Short-term marketable securities are held for two separate and distinct purposes: (1) to provide liquidity as a substitute for cash and (2) as a non-operating investment. Marketable securities held while awaiting reinvestment are not available for liquidity purposes.

Correct AnswerverifiedShow Answer

Net working capital is defined as current assets divided by current liabilities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is most consistent with efficient inventory management? The firm has a

Correct AnswerverifiedShow Answer

Famous Farm's payables deferral period (PDP) is 50 days (on a 365-day basis) , accounts payable are $100 million, and its balance sheet shows inventory of $125 million. What is the inventory turnover ratio?

Correct AnswerverifiedShow Answer

Accruals are "free" capital in the sense that no explicit interest must normally be paid on accrued liabilities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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verified

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