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Fresh Foods, Inc. has a cash cycle of 13.2 days, an operating cycle of 21 days, and an inventory period of 2 days. The company reported cost of goods sold in the amount of $280,000, and credit sales were $430,000. What is the company's average balance in accounts payable?


A) $5,984
B) $7,414
C) $10,203
D) $11,844
E) $13,515

F) A) and C)
G) All of the above

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How can a firm benefit from preparing a short-term financial plan?

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Student answers will vary but should ind...

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Earth Green's monthly purchases are equal to 68 percent of the following month's sales. The accounts payable period for purchases is 30 days. All other expenses are paid when incurred. Assume each month has 30 days and August sales are $18,500. The company has compiled the following information. Earth Green's monthly purchases are equal to 68 percent of the following month's sales. The accounts payable period for purchases is 30 days. All other expenses are paid when incurred. Assume each month has 30 days and August sales are $18,500. The company has compiled the following information. What is the projected amount of disbursements for the month of July? A) $13,910 B) $14,550 C) $15,220 D) $16,080 E) $16,760 What is the projected amount of disbursements for the month of July?


A) $13,910
B) $14,550
C) $15,220
D) $16,080
E) $16,760

F) C) and D)
G) A) and B)

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Which one of the following is most indicative of a flexible short-term financial policy?


A) High ratio of short-term debt to long-term debt
B) Relatively small investment in current assets
C) High ratio of current assets to sales
D) Low level of net working capital
E) Relatively low level of liquidity

F) D) and E)
G) B) and C)

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Suzie Q's has these projected sales estimates: Suzie Q's has these projected sales estimates: The company collects 18 percent of its sales in the month of sale, 69 percent in the month following the month of sale, and another 11 percent in the second month following the month of sale. Two percent of sales are never collected. What is the amount of the September collections? A) $25,863 B) $27,209 C) $29,406 D) $31,288 E) $34,516 The company collects 18 percent of its sales in the month of sale, 69 percent in the month following the month of sale, and another 11 percent in the second month following the month of sale. Two percent of sales are never collected. What is the amount of the September collections?


A) $25,863
B) $27,209
C) $29,406
D) $31,288
E) $34,516

F) A) and D)
G) None of the above

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Eglon Grain and Feed has the following estimated sales. Eglon Grain and Feed has the following estimated sales. Purchases are equal to 71 percent of the following quarter's sales. The accounts receivable period is 30 days and the accounts payable period is 60 days. Assume there are 30 days in each month. How much will the firm owe its suppliers at the end of quarter two? A) $3,692 B) $3,807 C) $4,123 D) $4,511 E) $5,027 Purchases are equal to 71 percent of the following quarter's sales. The accounts receivable period is 30 days and the accounts payable period is 60 days. Assume there are 30 days in each month. How much will the firm owe its suppliers at the end of quarter two?


A) $3,692
B) $3,807
C) $4,123
D) $4,511
E) $5,027

F) A) and B)
G) A) and C)

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Which one of the following actions will decrease the operating cycle?


A) Increasing inventory
B) Paying suppliers faster
C) Buying more inventory with cash rather than with credit
D) Granting customers more time to pay for their credit purchases
E) Lessening the production time needed to manufacture a good for sale

F) A) and C)
G) A) and B)

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Western Feed Mills has projected the following quarterly sales amounts for the coming year: Western Feed Mills has projected the following quarterly sales amounts for the coming year: Accounts receivable at the beginning of the year are $325. Western Feed Mills has a 60-day collection period. How much cash will the firm collect in quarter 1 and quarter 2 respectively? A) $325; $498 B) $498; $347 C) $498; $530 D) $672; $367 E) $672; $540 Accounts receivable at the beginning of the year are $325. Western Feed Mills has a 60-day collection period. How much cash will the firm collect in quarter 1 and quarter 2 respectively?


A) $325; $498
B) $498; $347
C) $498; $530
D) $672; $367
E) $672; $540

F) C) and D)
G) B) and D)

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Which one of the following statements related to the inventory period is correct?


A) The inventory period increases as the inventory turnover rate increases.
B) The length of the inventory period depends on the length of the cash cycle.
C) The inventory period is the average number of days a firm holds inventory on its shelves.
D) The inventory period is equal to the operating cycle minus the accounts payable period.
E) The inventory period has no effect on the cash cycle.

F) C) and E)
G) All of the above

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Thom's Legal Aid has the following estimated revenue. Thom's Legal Aid has the following estimated revenue. Assume each month has 30 days and the accounts receivable period is 60 days. How much does the firm expect to collect in April? A) $14,800 B) $15,600 C) $16,350 D) $16,400 E) $17,900 Assume each month has 30 days and the accounts receivable period is 60 days. How much does the firm expect to collect in April?


A) $14,800
B) $15,600
C) $16,350
D) $16,400
E) $17,900

F) A) and E)
G) A) and B)

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By definition, an inventory loan is which one of the following types of loan?


A) Secured short-term loan
B) Unsecured short-term loan
C) Secured long-term loan
D) Unsecured long-term loan
E) Trust receipt loan

F) C) and D)
G) B) and D)

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The Green Fiddle increased its operating cycle from 139 days to 146 days while the cash cycle decreased by 3 days. How have these changes affected the accounts payable period?


A) Decreased by 10 days
B) Decreased by 4 days
C) Decreased by 1 day
D) Increased by 4 day
E) Increased by 10 days

F) B) and C)
G) A) and E)

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All else constant, which one of the following will decrease the cash cycle?


A) Decreasing the credit period granted to a customer
B) Decreasing the inventory turnover rate
C) Decreasing the accounts payable period
D) Decreasing the accounts receivable turnover rate
E) Increasing the receivables period

F) A) and D)
G) A) and B)

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Dover Wholesalers sells products exclusively to Benn Retailer. Benn Retailer buys exclusively from Dover Wholesalers. Dover Wholesalers has a receivables period of 44 days, an inventory period of 8 days, and a payables period of 63 days. Benn Retailer has an inventory period of 15 days, a receivables period of 22 days, and a payables period of 44 days. Which one of the following statement is correct given this information?


A) Dover Wholesalers has a shorter operating cycle than does Benn Retailer.
B) Benn Retailer has an operating cycle of 81 days.
C) It takes Benn Retailer less time to collect payment on a sale than it does for the firm to sell its inventory.
D) Dover Wholesalers is financing 100 percent of Benn Retailers operating cycle.
E) Dover Wholesalers has a cash cycle of 11 days.

F) All of the above
G) A) and B)

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How should a firm determine whether a restrictive or a flexible financial policy is best given its current situation?

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Which policy is best for a particular fi...

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Which one of the following characteristics applies to commercial paper?


A) Maturities of 270 days or more
B) Offerings registered with the SEC
C) Interest rates higher than comparable bank loans
D) Issued directly by large-sized firms
E) Issued primarily by low-rated firms

F) A) and E)
G) A) and C)

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Which one of the following is the length of time that a retailer owes its supplier for an inventory purchase?


A) Inventory period
B) Accounts receivable period
C) Accounts payable period
D) Operating cycle
E) Cash cycle

F) A) and D)
G) C) and D)

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Which one of the following commences on the day inventory is purchased and ends on the day the payment for that inventory is collected? Assume all sales and purchases are on credit.


A) Inventory period
B) Accounts receivable period
C) Accounts payable period
D) Operating cycle
E) Cash cycle

F) A) and B)
G) A) and E)

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The Switch Back currently has 52 days in its cash cycle and 131 days in its operating cycle. The firm purchases its inventory from one supplier. This supplier has offered a 5 percent discount to The Switch Back if it will pay for its purchases within 10 days instead of the normal 32 days. If the Switch Back opts to take advantage of the discount offered, its new operating cycle will be _____ days and its new cash cycle will be _____ days.


A) 109; 30
B) 109; 74
C) 131; 30
D) 131; 74
E) 153; 74

F) A) and C)
G) C) and E)

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Which one of the following statements about the operating cycle is correct?


A) The operating cycle illustrates the sources and uses of cash.
B) The operating cycle is equal to the cash cycle plus the accounts receivable period.
C) The operating cycle begins when a product is sold to a customer.
D) The operating cycle is based on a 360-day year.
E) The operating cycle describes how a product moves through the current asset accounts.

F) A) and C)
G) B) and D)

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