Question 1

The best-selling pair of roller skates The Teen Store offers sells for $79.99 a pair.The store consistently sells 5,700 pairs of these roller skates every year.The fixed costs to order more skates is $68 and the carrying costs are $1.95 per pair.What is the economic order quantity?

Accepted Answer

A)   446 pairs
B)   515 pairs
C)   529 pairs
D)   631 pairs
E)   648 pairsF) B) and E)
G) B) and D)

Question 2

The incremental investment in receivables under the accounts receivable approach is equal to:

Accepted Answer

A)   P - vQ′.
B)   PQ′.
C)   PQ + v(Q′ - Q) .
D)   P(Q′ - Q) .
E)   PQ(Q′ - Q) .F) All of the above
G) A) and B)

Question 3

Which one of the following is a system for managing demand-dependent inventories that minimizes the inventory levels of a firm?

Accepted Answer

A)   just-in-time inventory
B)   turnover planning
C)   net working capital planning
D)   inventory scoring
E)   inventory rankingF) A) and B)
G) C) and D)

Question 4

Which of the following are frequently used as sources of information when trying to ascertain the creditworthiness of a customer?
I.payment history with similar firms
II.credit reports
III.financial statements
IV.information provided by a bank

Accepted Answer

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

Question 5

A supplier grants your firm credit terms of 2/10,net 40.What is the effective annual rate of the discount if the firm purchases $4,800 worth of merchandise?

Accepted Answer

A)   27.24 percent
B)   26.57 percent
C)   28.80 percent
D)   29.03 percent
E)   29.27 percentF) None of the above
G) C) and D)

Question 6

Under credit terms of 1/5,net 15,customers should:

Accepted Answer

A)   always pay on the 15th day.
B)   take the 5 percent discount and pay immediately.
C)   take the discount and pay on the day following the day of sale.
D)   either take the discount or pay on the 15th day.
E)   both take the discount and pay on the 15th day.F) C) and D)
G) B) and C)

Question 7

A firm offers terms of 2/9,net 41.What effective annual interest rate does the firm earn when a customer does not take the discount?

Accepted Answer

A)   18.67 percent
B)   20.45 percent
C)   23.37 percent
D)   25.34 percent
E)   25.92 percentF) A) and D)
G) None of the above

Question 8

Today,October 12,Nadine's Fashions purchased $511 worth of merchandise from a supplier.The credit terms are 1/5,net 20.By what day does Nadine's have to make the payment to receive the discount? Note: October has 31 days.

Accepted Answer

A)   October 13
B)   October 15
C)   October 17
D)   October 27
E)   November 1F) B) and D)
G) A) and C)

Question 9

-Your current sales consist of 32 units per month at a price of $225 a unit.You are weighing the pros and cons of switching to a net 30 credit policy from your current cash only policy.If you decide to switch your credit policy you also plan to increase the sales price to $240 a unit.If you make the switch you do not expect your total monthly sales quantity to change but you do expect a 3 percent default rate.The monthly interest rate is 1.5 percent.What is the net present value of the proposed credit policy switch?

Accepted Answer

A)   $6,727
B)   $6,893
C)   $7,965
D)   $9,440
E)   $9,481F) A) and E)
G) C) and D)

Question 10

Which one of the following credit instruments is commonly used in international commerce?

Accepted Answer

A)   open account
B)   sight draft
C)   time draft
D)   banker's acceptance
E)   promissory noteF) A) and B)
G) C) and D)

Question 11

At the optimal order quantity size,the:

Accepted Answer

A)   total cost of holding inventory is fully offset by the restocking costs.
B)   carrying costs are equal to zero.
C)   restocking costs are equal to zero.
D)   total costs equal the carrying costs.
E)   carrying costs equal the restocking costs.F) A) and C)
G) B) and E)

Question 12

Which one of the following will increase a firm's investment in accounts receivables?

Accepted Answer

A)   a decrease in the number of days for which credit is granted
B)   a decrease in credit sales
C)   an increase in cash sales
D)   a decrease in the average collection period
E)   an increase in average daily credit salesF) C) and D)
G) B) and D)

Question 13

The Green Hornet sells earnings forecasts for international securities.Its credit terms are 2/10,net 30.Based on experience,55 percent of all customers will take the discount.The firm sells 2,700 forecasts every month at a price of $1,100 each.What is the firm's average balance sheet amount in accounts receivable?

Accepted Answer

A)   $940,274
B)   $1,408,272
C)   $1,855,233
D)   $1,867,012
E)   $1,915,387F) A) and C)
G) None of the above

Question 14

Roger's Home Appliances offers credit to customers it deems worthy of this privilege.To determine if a customer is worthy,the firm computes a numerical value which is used to estimate the probability that the customer will default if credit is granted to them.The process of computing this numerical value is referred to as:

Accepted Answer

A)   credit scoring.
B)   credit capacity.
C)   receipts assessment.
D)   conditions for credit.
E)   consumer analysis.F) A) and C)
G) B) and E)

Question 15

The ABC approach to inventory management is based on the concept that:

Accepted Answer

A)   inventory should arrive just in time to be used.
B)   the inventory period should be constant for all inventory items.
C)   basic inventory items that are essential to production and also inexpensive should be ordered in small quantities only.
D)   a small percentage of the inventory items probably represents a large percentage of the inventory cost.
E)   one-third of a year's inventory need should be on hand,another third should be on order,and the last third should not be ordered yet.F) A) and B)
G) B) and D)

Question 16

One of the best selling items L.T.Ten offers sells for $9.99 a unit.The variable cost per unit is $6.38 and the carrying cost per unit is $1.12.The firm sells 6,500 of these units each year.The fixed cost to order this item is $75.What is the economic order quantity?

Accepted Answer

A)   690 units
B)   747 units
C)   933 units
D)   1,157 units
E)   1,260 unitsF) A) and D)
G) A) and E)

Question 17

Which one of the following factors tends to favor longer credit periods?

Accepted Answer

A)   high consumer demand
B)   lower priced merchandise
C)   increased credit risk
D)   merchandise with low collateral value
E)   increased competitionF) A) and B)
G) A) and C)

Exam 20: Credit and Inventory Managementpart Eight: Topics in Corporate Finance

A firm offers terms of 2/9,net 41.What effective annual interest rate does the firm earn when a customer does not take the discount?

Correct Answer
verified

Today,October 12,Nadine's Fashions purchased $511 worth of merchandise from a supplier.The credit terms are 1/5,net 20.By what day does Nadine's have to make the payment to receive the discount? Note: October has 31 days.

Correct Answer
verified

A supplier grants your firm credit terms of 2/10,net 40.What is the effective annual rate of the discount if the firm purchases $4,800 worth of merchandise?

Correct Answer
verified

The ABC approach to inventory management is based on the concept that:

Correct Answer
verified

Which one of the following factors tends to favor longer credit periods?

Correct Answer
verified

Which one of the following credit instruments is commonly used in international commerce?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Under credit terms of 1/5,net 15,customers should:

Correct Answer
verified

One of the best selling items L.T.Ten offers sells for $9.99 a unit.The variable cost per unit is $6.38 and the carrying cost per unit is $1.12.The firm sells 6,500 of these units each year.The fixed cost to order this item is $75.What is the economic order quantity?

Correct Answer
verified

Which of the following are frequently used as sources of information when trying to ascertain the creditworthiness of a customer? I.payment history with similar firms II.credit reports III.financial statements IV.information provided by a bank

Correct Answer
verified

The incremental investment in receivables under the accounts receivable approach is equal to:

Correct Answer
verified

The best-selling pair of roller skates The Teen Store offers sells for $79.99 a pair.The store consistently sells 5,700 pairs of these roller skates every year.The fixed costs to order more skates is $68 and the carrying costs are $1.95 per pair.What is the economic order quantity?

Correct Answer
verified

Correct Answer
verified

At the optimal order quantity size,the:

Correct Answer
verified

Which one of the following will increase a firm's investment in accounts receivables?

Correct Answer
verified

Which one of the following is a system for managing demand-dependent inventories that minimizes the inventory levels of a firm?

Correct Answer
verified

Exam 20: Credit and Inventory Managementpart Eight: Topics in Corporate Finance

A firm offers terms of 2/9,net 41.What effective annual interest rate does the firm earn when a customer does not take the discount?

Correct AnswerverifiedShow Answer

Today,October 12,Nadine's Fashions purchased $511 worth of merchandise from a supplier.The credit terms are 1/5,net 20.By what day does Nadine's have to make the payment to receive the discount? Note: October has 31 days.

Correct AnswerverifiedShow Answer

A supplier grants your firm credit terms of 2/10,net 40.What is the effective annual rate of the discount if the firm purchases $4,800 worth of merchandise?

Correct AnswerverifiedShow Answer

The ABC approach to inventory management is based on the concept that:

Correct AnswerverifiedShow Answer

Which one of the following factors tends to favor longer credit periods?

Correct AnswerverifiedShow Answer

Which one of the following credit instruments is commonly used in international commerce?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under credit terms of 1/5,net 15,customers should:

Correct AnswerverifiedShow Answer

One of the best selling items L.T.Ten offers sells for $9.99 a unit.The variable cost per unit is $6.38 and the carrying cost per unit is $1.12.The firm sells 6,500 of these units each year.The fixed cost to order this item is $75.What is the economic order quantity?

Correct AnswerverifiedShow Answer

Which of the following are frequently used as sources of information when trying to ascertain the creditworthiness of a customer? I.payment history with similar firms II.credit reports III.financial statements IV.information provided by a bank

Correct AnswerverifiedShow Answer

The incremental investment in receivables under the accounts receivable approach is equal to:

Correct AnswerverifiedShow Answer

The best-selling pair of roller skates The Teen Store offers sells for $79.99 a pair.The store consistently sells 5,700 pairs of these roller skates every year.The fixed costs to order more skates is $68 and the carrying costs are $1.95 per pair.What is the economic order quantity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the optimal order quantity size,the:

Correct AnswerverifiedShow Answer

Which one of the following will increase a firm's investment in accounts receivables?

Correct AnswerverifiedShow Answer

Which one of the following is a system for managing demand-dependent inventories that minimizes the inventory levels of a firm?

Correct AnswerverifiedShow Answer

Correct Answer
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