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AJ's Market generally holds $50,000 in cash in case an unexpected investment opportunity arises.This is an example of the ____ motive for holding cash.


A) precautionary
B) opportunistic
C) speculative
D) reserve
E) transaction

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

Correct Answer

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During a normal month, Jim's Gems receives a total of nine checks with a total value of $97,500.On average, it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?


A) $3,250
B) $13,000
C) $26,000
D) $65,000
E) $52,000

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

Correct Answer

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A disbursement account into which funds are transferred only as needed to cover the demands for payment is called a(n) ____ account.


A) master
B) controlled disbursement
C) bank controlled
D) investment
E) safety stock

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

Correct Answer

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Holding cash simply as a financial reserve is referred to as the ____ motive.


A) precautionary
B) opportunistic
C) speculative
D) activity
E) transaction

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

Correct Answer

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A

On June 22, Roy's Welding Shop purchased $2,618 worth of goods.The terms of the sale were 2/15, net 45.What is the effective annual rate of interest for the credit period for this sale?


A) 27.86 percent
B) 31.38 percent
C) 29.42 percent
D) 25.73 percent
E) 28.63 percent

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

Correct Answer

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Which of these is a speculative motive for holding cash?


A) Buying extra inventory because a key supplier offered a special one-time discount
B) Paying a $100 bonus to all employees at year-end
C) Paying the annual insurance premium on the firm's assets
D) Needing to purchase a new delivery truck because the old one was totally destroyed in an accident
E) Contributing $1,000 to help fund medical care for an uninsured neighbor

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

Correct Answer

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What is the key difference between an ordinary preferred stock and a money market preferred stock?


A) Issuer
B) Maturity
C) Fixed versus floating dividend
D) Voting rights
E) Absence of any dividend

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

Correct Answer

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The economic order quantity approach states that inventory order sizes should be determined by:


A) dividing annual item sales by the carrying cost per item and multiplying by 2.
B) computing the average number of items sold each month.
C) equating restocking costs with carrying costs.
D) dividing the inventory into various groups based on the value per item.
E) computing the amount of the derived demand.

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

Correct Answer

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Beauty Aids has an average collection period of 8.4 days and annual credit sales of $937,800.What is the average investment in accounts receivable as shown on the balance sheet? Assume a 365-day year.


A) $18,850
B) $20,375
C) $22,506
D) $18,906
E) $21,582

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

Correct Answer

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Laurie's Ice Rink keeps an extra $1,000 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?


A) Speculative
B) Float requirement
C) Transaction
D) Precautionary
E) Availability

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

Correct Answer

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The graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy is called the:


A) aging report.
B) economic credit function.
C) optimal credit curve.
D) credit analysis graph.
E) credit cost curve.

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

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Which of these is evidence of indebtedness?


A) Terms of sale
B) Credit cost curve
C) Credit instrument
D) Concentration policy
E) Credit policy

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

Correct Answer

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Used Furniture sells 1,330 sofas a year at an average price per sofa of $549.The carrying cost per unit is $31.60.The company orders 75 sofas at a time and has a fixed order cost of $69 per order.The sofas are sold out before they are restocked.What is the economic order quantity?


A) 76 sofas
B) 72 sofas
C) 81 sofas
D) 98 sofas
E) 101 sofas

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

Correct Answer

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You place an order for 1,800 units of widgets at a unit price of $14.99.The supplier offers terms of 2/10, net 30.If you don't take the discount, how much interest on your order are you paying implicitly?


A) $568.33
B) $539.64
C) $519.36
D) $540.65
E) $564.80

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

Correct Answer

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PP&M sells earnings forecasts for international securities.Its credit terms are 1/5, net 20.Based on experience, 66 percent of all customers take the discount.What is the average collection period?


A) 10.4 days
B) 10.1 days
C) 11.1 days
D) 10.6 days
E) 10.9 days

F) D) and E)
G) A) and D)

Correct Answer

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Al's Bakery has a checkbook balance of $1,650.A $700 deposit was made today and will be added to the available balance tomorrow.There are two outstanding checks that total to $623 that should clear tomorrow.There are no other outstanding items.Which one of the following statements accurately reflects this situation?


A) The disbursement float is $1,650.
B) The firm's current available balance is equal to $1,650 plus $700 minus $623.
C) The firm's collection float exceeds its disbursement float.
D) The firm's available balance is greater than its book balance.
E) The firm has a net disbursement float.

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

Correct Answer

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Which one of the following will tend to increase the length of the credit period?


A) Decrease in product cost
B) Decrease in consumer demand
C) Decrease in collateral value
D) Increase in credit risk
E) Increase in product standardization

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

Correct Answer

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Which of the following characteristics apply to U.S.Treasury bills? I.Interest income taxed at both the federal and state level II.Minimal, if any, default risk III.Marketable, but not liquid IV.Short maturities


A) I and III only
B) II and IV only
C) I, II, and IV only
D) II, III, and IV only
E) I, II, III, and IV

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

Correct Answer

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B

Which one of the following is a disbursement account into which funds are transferred from a master account only as the funds are needed to cover checks presented for payment?


A) Lockbox account
B) Cash concentration account
C) Ledger account
D) Zero-balance account
E) Cash clearing account

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

Correct Answer

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Which of these refers to a customer's willingness to meet his or her credit obligations?


A) Capital
B) Conditions
C) Capacity
D) Character
E) Collateral

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

Correct Answer

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D

Showing 1 - 20 of 113

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