DeVry Chicago BUSN 379 Finance Wk7 Homework

Finance Wk7 Homework1. Question : (TCO 2) Select any actions that do not affect the cash account. Select all that apply: Student Answer: Goods are sold on credit An interest payment on a notes payable is made Raw materials are purchased and paid for with credit A new machine is purchased and paid for with the business line of credit Question 2. Question : (TCO 2) Which one of the following will decrease the operating cycle? Student Answer: increasing the days’ sales in inventory decreasing the accounts payable period decreasing the cash cycle increasing the accounts receivable turnover rate decreasing the accounts payable turnover rate Question 3. Question : (TCO 2) Assume Green Leaf Nursery anticipated sales of $630 in the first quarter. Accounts receivable at the beginning of the year was $373. Assuming a collection period of 60 days, which is the approximate cash collection for the quarter? Student Answer: $420 $607 $590 $580 None of the above Question 4. Question : (TCO 2) Which one of the following practices will reduce a firm’s collection float? Student Answer: utilizing zero-balance accounts depositing checks weekly rather than daily requiring all customers pay by check rather than with cash installing a lockbox system paying all bills five days sooner Question 5. Question : (TCO 2) Which of the following statements is true? Select all that apply: Student Answer: The optimal credit policy minimizes the total cost of granting credit. Firms should avoid offering credit at all cost. An increase in a firm’s average collection period generally indicates that an increased number of customers are taking advantage of the cash discount. The costs of the credit application process and the costs expended in the collection process are carrying costs of granting credit. Capacity refers to the ability of a firm to meet its credit obligations out its operating cash flows. The optimal credit policy is the policy that produces the largest amount of sales for a firm. Question 6. Question : (TCO 2) You place an order for 100 units of inventory Part A at a unit price of $522. The supplier offers terms of 2/25, net 40. How much should you remit if you take the discount? Student Answer: $52,200 $51,156 $51,678 None of the above Question 7. Question : (TCO 2) Auto Parts sells 1,600 electric parts per month and then reorders another 1,600 parts. If the relevant carrying cost per electric part is $4 and the fixed order cost is $650, what is the total carrying cost and the restocking cost, respectively? Student Answer: $6,400 and $33,800 $3,200 and $33,800 $6,400 and $7,800 $3,200 and $7,800 None of the above Question 8. Question : (TCO 2) Company ABC has expected sales of 12,000 units this year, an ordering cost of $6 per order and carrying costs of $1.60 per unit. What is the average inventory? Student Answer: 310 units 300 units 150 units 155 units None of the above Question 9. Question : (TCO 2) The _________ is the time it takes to acquire and sell inventory. Student Answer: cash cycle operating cycle inventory period accounts receivable period accounts payable period Question 10. Question : (TCO 2) List three examples of short-term investments.