BUSN379 Fundamentals of Corporate Finance: Week 7 Homework HWES7 (10 items) - Version 1

BUSN379 Corporate Finance
Homework ES7 (Version 1)

1.(TCO 2) Select any actions that do not affect the cash account. Select all that apply: (Points: 3)
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

2. (TCO 2) Which one of the following will increase the operating cycle? (Points: 3)
increasing the accounts payable period
decreasing the accounts payable turnover rate
decreasing the cash cycle
increasing the accounts receivable turnover rate
increasing the inventory period

3. (TCO 2) Assume Green Leaf Nursery anticipated sales of $500 in this quarter. Accounts receivable at the beginning of the quarter was $300. Assuming a collection period of 30 days, which is the approximate cash collections amount for the quarter? (Points: 3)
$550
$630
$250
$170
None of the above

4. (TCO 2) Which of the following does not reduce collection float? (Points: 3)
deposit collections at least daily.
make sure all checks it receives are properly dated and signed.
utilize the benefits of the Check Clearing Act for the 21st Century.
consolidate all lockboxes into one lockbox located near the home office.

5. (TCO 2) Which of the following statements is false? Select all that apply: (Points: 3)
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.
Character refers to the ability of a firm to meet its credit obligations out its operating cash flows.

6. (TCO 2) You place an order for 100 units of inventory Part A at a unit price of $522. The supplier offers terms of 1/25, net 40. How much should you remit if you take the discount? (Points: 3)
$52,200
$39,150
$51,678
None of the above

7. (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? (Points: 3)
$6,400 and $33,800
$3,200 and $33,800
$6,400 and $7,800
$3,200 and $7,800
None of the above

8. (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 EOQ? (Points: 3)
310 units
300 units
150 units
155 units
None of the above

9. (TCO 2) The ___________ is the time that elapses between the sale of an item and the receipt of payment for that sale. (Points: 3)
accounts receivable period
accounts payable period
cash cycle
customer operating cycle
None of the above

10. (TCO 2) List three examples of short-term borrowing. (Points: 3)
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