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Exam 18: Short-Term Finance and Planning

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Question 151

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Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the inventory period?

A) 28 days
B) 31 days
C) 59 days
D) 62 days
E) 90 days

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Question 152

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The formula (Cash cycle + accounts payable period) correctly defines the operating cycle.

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Question 153

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Suppose that the inventory period is 50 days, the accounts receivable period is 40 days, and the cash cycle is 55 days. What is the accounts payable period?

Which one of the following statements concerning inventory loans is correct?

Bilt Rite, Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000. How long on average does it take the firm to collect its receivables?

Your firm decides to increase the time allowed customers to pay their bills from 30 to 40 days. All else the same, this action will _____________ and _______________.

Fulton Corporation had sales of $60,000 in January; $80,000 in February; $95,000 in March; $115,000 in April and $145,000 in May. Cost of goods sold has consistently been at 70% of sales. Additionally, Fulton had $15,000 worth of merchandise at the start of January and plans on having inventory on hand worth 35% of next month's cost of goods sold. If all inventory purchases are purchased and paid for in the current month, calculate the amount of inventory purchased and paid for in March.

Which of the following is the best definition of covenants?

Your firm sells $2,000 worth of goods in December, $1,700 worth in January, $1,500 in February and $1,600 in March. Your cost is 60% of the retail price. You have a receivables period of 30 days and a payables period of 45 days. You buy your products one month prior to selling them. Which one of the following statements is correct given this information?

Blackberry, Inc. had sales for the past year of $38,250 and cost of goods sold of $21,038. In addition, the statement of financial position accounts was as shown in the table below. Blackberry uses average account values and a 365-day year where applicable in all of its computations. What is the inventory period for Blackberry, Inc.?

During the past year, Omni, Inc. had total credit sales of $1,000,000. Omni's cost of sales averaged 70% of credit sales, it had average accounts receivable of $124,500, and it always paid its payables according to the required net 30 schedule. Inventory averaged $184,000 for the year. Using this information, compute the length of the five different cycles/periods discussed in the text that trace inventory from purchase to collection of the account.

The average length of time it takes customers to pay for the merchandise they buy is called the:

ALPHA, Inc. sells all of its products on credit. Purchases are 60% of the sales for the following quarter. The firm uses a 365-day year and account averages where applicable in its computations. The financial manager of the firm provides the following relevant information: What is the accounts payable balance at the beginning of Quarter 2?

At the ideal level of inventory, the:

A benefit of compiling a short-term financial plan is knowing when your firm should have excess funds that can be invested.

Which one of the following is a use of cash?

Suppose that the inventory period is 50 days, the accounts payable period is 35 days, and the cash cycle is 55 days. What is the operating cycle?

An increase in fixed assets is a source of cash.

Keyser Metal Fabricators collects 25% of sales in the month of sale, 65% in the month following the month of sale, and the 10% in the second month following the month of sale. In August, Keyser will collect _____ sales.

Blackberry, Inc. had sales for the past year of $38,250 and cost of goods sold of $21,038. In addition, the statement of financial position accounts was as shown in the table below. Blackberry uses average account values and a 365-day year where applicable in all of its computations. What is the cash cycle for Blackberry, Inc.?