Chapter 15--Managing Short-
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Chapter 15--Managing Short-

Course: FIN 3604, Spring 2010

School: USF

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Chapter 15--Managing Short-Term Assets Chapter 15--Managing Short-Term Assets Student: ___________________________________________________________________________ 1. Firms hold cash balances in order to complete transactions that are necessary in business operations and as compensation to banks for providing loans and services. True False 2. Two of the primary motives for a firm to hold cash are the...

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15--Managing Chapter Short-Term Assets Chapter 15--Managing Short-Term Assets Student: ___________________________________________________________________________ 1. Firms hold cash balances in order to complete transactions that are necessary in business operations and as compensation to banks for providing loans and services. True False 2. Two of the primary motives for a firm to hold cash are the transaction motive and the precautionary motive. True False 3. A firm's target cash balance should be set as the smaller of (1) its transaction balance plus a precautionary (safety stock) balance or (2) its required compensating balance. True False 4. For a firm that makes heavy use of float, being able to forecast its collections and disbursement check clearings is essential. True False 5. Lockbox arrangements are one way for a firm to speed up the receipt of payments from customers. True False 6. Target cash balances are generally not affected by compensating balance requirements except during periods of high interest rates and tight money. True False 7. The primary purpose of compensating balances required of borrowers is to compensate the bank in the event the borrower defaults on the loan. True False 8. Fixed dividend preferred stock is a good candidate for marketable security holdings designed to provide liquidity because 70 percent of the dividends are excludable from taxable income, hence the preferred would provide a relatively high after-tax rate of return. True False 9. The term "interest rate price risk" refers to the probability that a firm will be unable to continue making interest payments on its debt. True False 10. The benefits of a sound cash management program are not sensitive to interest rates. True False 11. If there are large fluctuations in a firm's cash flows, or if there are large costs associated with selling securities, then the firm should hold relatively small average cash balances. True False 12. The average accounts receivables balance is determined jointly by the volume of credit sales and the days sales outstanding. True False 13. The four major elements in a firm's credit policy are (1) credit standards, (2) credit terms, (3) monitoring function, and (4) collection policy. True False 14. Credit associations and credit reporting agencies are two major sources of external credit information on credit customers. True False 15. If you receive some goods on April 1 with the terms 3/20, net 30, June 1 dating, it means that you will receive a 3 percent discount if the bill is paid on or before June 20 and that the full amount must be paid 30 days after receipt of the goods. True False 16. Offering trade credit discounts is costly to a firm and as a result, firms that offer trade discounts are usually those that are performing poorly and need cash quickly. True False 17. Inventory management focuses on three basic questions: (1) how many units to hold in stock, (2) how many units of each item to order, and (3) at what point to reorder. True False 18. The central goal of inventory management is to provide sufficient incentives to ensure that the firm never suffers a stock-out (i.e., runs out of an inventory item). True False 19. Inventory management is largely self-contained; that is, only minimum coordination among other departments such as sales, purchasing, and production is required for successful inventory management. True False 20. Generally, ordering costs are the single most important cost element in inventory management, because they are greater in magnitude than carrying costs. True False 21. The economic order quantity is that order quantity which results in the minimum ordering costs. True False 22. If the unit sales of a firm double, the optimal order quantity as determined by the EOQ model will also double. True False 23. If the forecasted sales or usage rate is not accurate, the EOQ model may not lead to efficient inventory management. True False 24. The ABC method of inventory classification helps management concentrate resources on those inventory items that are most critical to the firm's operations. True False 25. A just-in-time system of inventory control requires that manufacturers coordinate production with suppliers so that raw materials or components arrive just as they are needed in the production process. The main objective of such a system is to reduce carrying costs. True False 26. The primary motivation behind out-sourcing is to provide the firm with an alternative source of supply in the event that its primary supplier is unable to meet the firm's raw material or component needs. True False 27. A Eurodollar is a U.S. dollar deposited in a bank outside the United States. True False 28. Credit policy for the multinational firm is generally riskier due in part to the additional consideration of exchange rates and also due to uncertainty regarding the credit worthiness of many foreign customers. True False 29. Exchange rates influence a multinational firm's inventory policy because changing currency values can affect the value of inventory. True False 30. The threat of expropriation creates an incentive for the multinational firm to minimize inventory holdings and to bring in goods only as needed. True False 31. The credit period is length of time for which credit is granted; after that time, the credit account is considered delinquent. True False 32. The terms of credit include the length of the credit period and any cash discounts offered. True False 33. The collection policy refers to the procedures the firm follows to collect its credit accounts. True False 34. Two commonly used methods of monitoring receivables are the DuPont method and the aging schedule. True False 35. All else equal, firms that hold greater amounts of short-term assets are considered more risky than firms that hold grater amounts of long-term securities. True False 36. Short term assets generally earn a higher rate of return than long-term assets, making short term assets a more desirable investment than long-term assets. True False 37. The target cash balance is the minimum cash balance a firm desires to maintain in order to conduct business. True False 38. The net float is the difference between the disbursement float and the collections float. True False 39. If the carrying costs of inventory increase then the economic ordering quantity of inventory will increase to insure the firm minimizes the total inventory costs. True False 40. Synchronization of cash flows is an important cash management technique and effective synchronization can actually increase a firm's profitability. True False 41. Collections float offsets disbursement float. If a firm's collections float is greater than its disbursement float then a firm is said to operate with positive net float. True False 42. A lockbox plan is one method of speeding up the check-clearing process for customer payments and decreasing the firm's net float position. True False 43. A firm has a daily average collection of checks equal to $250,000. It takes the firm approximately 4 days to convert the funds into usable cash. Assume (1) a lockbox system could be employed which would reduce the cash conversion procedure to 21/2 days, and (2) the firm could invest any additional cash received at 6 percent after taxes. The lockbox system would be a good buy if it costs only $23,000 annually. True False 44. Borrowing and holding marketable securities are substitute financing alternatives, although the two strategies may have different costs. True False 45. Other things equal and held constant, a firm with an effective accounts receivable monitoring system, when compared with a firm without such a monitoring system, will likely have lower additional funds needed. True False 46. A firm's collection policy and the procedures it follows to collect accounts receivable play an important role in keeping its deferrables period short, although too strict a collection policy can result in outright losses due to non-payment. True False 47. In part because money has time value, cash sales are always more profitable and more valuable than credit sales. True False 48. Generally, the longer the normal inventory holding period of a customer the longer the credit period. One effect of extending the credit period to match the customer's merchandise holding period is to increase the customer's payables deferral period which actually serves to shorten the customer's cash conversion cycle. True False 49. If a firm's terms are 2/10, net 30 days, and its DSO is 28 days, we can be certain that the credit department is functioning efficiently and the percentage of past due accounts is minimal. True False 50. If your firm's DSO or aging schedule deteriorates from the first quarter of the year to the second quarter, this is a clear indication that your firm's credit policy has weakened. True False 51. If the average collection period or days sales outstanding is increasing the firm should consider easing its credit policy to allow credit to more of its customers. True False 52. Which of the following is (are) typically part of the cash budget? A. Payment lag. B. Payment for plant construction. C. Cumulative cash. D. All of the above. E. Only answers a and c above. 53. Which of the following statements concerning the cash budget is true? A. Depreciation expense is not explicitly included, but depreciation effects are implicitly included in estimated tax payments. B. Cash budgets do not include financial expenses such as interest and dividend payments. C. Cash budgets do not include cash inflows from long-term sources such as bond issues. D. Answers a and b above. E. Answers a and c above. 54. Which of the following actions in managing the cash account would, in general, either not be feasible or else not be consistent with the firm's wealth maximization objective? A. Increase synchronization of inflows and outflows. B. Use drafts for disbursing funds. C. Use a lockbox plan. D. Maintain an average balance which is equal to that required as a compensating balance or that which minimizes total cash management costs, whichever is lower. E. None of the above (all would be feasible and consistent actions). 55. A lockbox plan is A. A method for safe-keeping of marketable securities. B. Used to identify inventory safety stocks. C. A system for slowing down the collection of checks written by a firm. D. A system for speeding up a firm's collections of checks received. E. Not described by any of the above statements. 56. Which of the following investments is not likely to be a proper investment for temporarily idle cash? A. Commercial paper. B. Treasury bills. C. Recently issued long-term corporate bonds. D. Government bonds due shortly. E. AT&T bonds due within one year. 57. Which of the following is not a situation which might lead a firm to hold marketable securities: A. The firm has purchased a fixed asset which will require a large write-off of depreciable expense. B. The firm must meet a known financial commitment, such as financing an ongoing construction project. C. The firm must finance seasonal operations. D. The firm has just sold long-term securities and has not yet invested the proceeds in earning assets. E. None of the above (all of the situations might lead the firm to hold marketable securities). 58. Which of the following statements is correct? A. A lockbox system is an example of concentration banking. B. For a firm that has many divisions or plants operating over a wide geographic area, payables centralization offers little benefit. C. If a firm increases its disbursement float, its net float will also increase, other things held constant. D. There are no actions a firm can take to improve its synchronization of cash flows. E. A lockbox system does not affect collections float. 59. Analyzing days sales outstanding (DSO) and the aging schedule are two common methods for monitoring receivables. However, they can provide erroneous signals to credit managers when A. Customers' payments patterns are changing. B. Sales fluctuate seasonally. C. Some customers take the discount and others do not. D. Sales are relatively constant, either seasonally or cyclically. E. None of the above. 60. If easing a firm's credit policy lengthens the collection period and results in a worsening of the aging schedule then why do firms take such actions? A. It normally stimulates sales. B. To meet competitive pressures. C. To increase the firm's deferral period for payables. D. All of the above. E. Both a and b above. 61. Which of the following statements is correct? A. The optimal credit policy is determined primarily by the industry in which the firm operates and by current economic conditions. B. Normally, when a credit sale is made, inventory is reduced by the cost of goods sold and an equal amount is credited to accounts receivable. C. A typical business credit report provides sufficient information to eliminate the need for informed human judgment in the credit decision. D. A customer's credit quality is usually determined in terms of the probability of the customer's default. E. Computers have had a significant effect in increasing efficiency in the areas of payroll and inventory, but have had little impact in accounts receivable management. 62. In the text, the "red-line method" refers to A. The policy of drawing a red line around certain neighborhoods on a map and then refusing to sell on credit to people who live within those areas. B. Restrictions imposed by companies which insure credit risks. C. The use, in Dun & Bradstreet's reports, of a red line to show the maximum amount of credit which should be extended to a given customer; companies using this limit when they screen customers' orders are said to be using the "red-line method." D. A method of controlling inventories by drawing a red line on the inside of a bin. E. A method of controlling receivables by drawing a red line on invoices of companies that are expected to pay late. 63. Which of the following might be attributed to efficient inventory management? A. High inventory turnover ratio. B. Low incidence of production schedule disruptions. C. High total asset turnover. D. All of the above. E. Only answers a and c above. 64. Which of the following is not a reason for a firm to hold cash balances? A. To cover routine payments and collections. B. To earn high rates of interest. C. To meet compensating balance requirements of banks. D. To provide a safety stock in the event of unforeseen fluctuations into cash flows. E. To take advantage of bargain purchases that might arise. 65. A minimum checking account balance that a firm must maintain with bank to help offset the costs and services such as check clearing and cash management advice is called a ____ balance. A. transactions B. compensating C. precautionary D. speculative E. convertible 66. A cash balance that is held to enable the firm to take advantage of any bargain purchases that might arise is called a ____ balance. A. transactions B. compensating C. precautionary D. speculative E. convertible 67. A cash balance held in reserve for unforeseen fluctuation in cash flows is called a ____ balance. A. transactions B. compensating C. precautionary D. speculative E. cash 68. Having synchronized cash flows enables a firm to A. increase its cash balances. B. increase its bank loans. C. increase interest expense. D. increase profits. E. None of the above. 69. The value of checks that have been written and disbursed but have not been deducted from the account on which they were written is the ____ float. A. disbursement B. net C. collections D. balance E. deposit 70. The amount of checks that have been received and deposited but have not yet been made available to the account in which they were deposited is the ____ float. A. disbursement B. net C. collections D. balance E. deposit 71. What type of system allows a customer's bank to periodically transfer funds from its account to a selling firm's bank account for payment of bills? A. Disbursement agreement. B. Preauthorized debit system. C. Lockbox agreement. D. Concentration banking system. E. Zero-balance account. 72. Which of the following will help a firm accelerate the collection of customer's payments and the conversion of those payments into cash? A. Lockbox agreement. B. Preauthorized debit system. C. Concentration banking. D. All of the above. E. Only answers a and c. 73. ____ is a technique used to reduce float by having payments sent to post office boxes located near the customer. A. Postal deposit system B. Preauthorized debit system C. Concentration banking D. Lockbox arrangement E. Zero-balance account 74. Which of the following is one of the common methods used to control disbursements or cash outflows? A. Lockbox agreement. B. Zero-balance account. C. Concentration banking. D. All of the above. E. Only answers b and c. 75. Which of the following is not a reason for firms to own marketable securities? A. Marketable securities serve as a substitute for cash balances. B. Marketable securities offer a place to temporarily put cash balance to work earning a positive return. C. Marketable securities are used as a temporary investment to finance seasonal or cyclical operations. D. Marketable securities are used as a temporary investment to amass funds to meet financial requirements in the near future. E. Marketable securities are more liquid than cash balances. 76. A liquid asset is an asset can be sold in a ____ period of time at a price ____ its fair market value. A. relatively long; way below B. relatively long; near C. relatively short; way below D. relatively short; near E. None of the above. 77. A report showing how long accounts receivable have been outstanding is called what? A. Time line. B. Preauthorized debit system. C. Aging schedule. D. Cash discount. E. Credit period. 78. Which of the following statements is correct? A. Shorter term cash budgets, in general, are used primarily for planning purposes while longer term budgets are used for actual cash control. B. The cash budget and the capital budget are planned separately and although they are both important to the firm, they are independent of each other. C. Since deprecation is a non-cash charge, it does not appear on nor have an effect on the cash budget. D. The target cash balance is set optimally such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it is changed to reflect long-term changes in the firm's operations. E. The typical actual cash budget will reflect interest on loans and income from investment of surplus cash. These numbers are expected values and actual results might turn out differently. 79. Which of the following statements about cash management is false? A. Depreciation expense does not appear explicitly on the cash budget, but its tax effects are included. B. If cash flows are not uniform during the month, then weekly or perhaps daily cash budgets should be prepared rather than monthly budgets. C. Compensating balance requirements do not affect a firm's target cash balance. D. Cash management involves costs, and it is important to analyze whether the benefits received outweigh the costs incurred. E. The cash budget is the foundation of good cash management. 80. Which of the following statement completions is correct? If the yield curve is upward sloping, then a firm's marketable securities portfolio, assumed to be held for liquidity purposes, should be A. Weighted toward long-term securities because they pay higher rates. B. Weighted toward short-term securities because they pay higher rates. C. Weighted toward U.S. Treasury securities to avoid interest rate risk. D. Weighted toward short-term securities to avoid interest rate risk. E. Balanced between long- and short-term securities to minimize the effects of either an upward or a downward trend in interest rates. 81. Which of the following statements is correct? A. Poor synchronization of cash flows which results in high cash management costs can be partially offset by increasing disbursement float and decreasing collections float. B. The size of a firm's net float is primarily a function of its natural cash flow synchronization and how it clears its checks. C. Lockbox systems are used mainly for security purposes as well as to decrease the firm's net float. D. If a firm can speed up its collections and slow down its disbursements, it will be able to reduce its net float. E. A firm practicing good cash management and making use of positive net float will bring its check book balance as close to zero as possible, but must never generate a negative book balance. 82. Which of the following statements is correct? A. Compensating balance requirements apply only to businesses, not to individuals. B. Compensating balances are essentially costless to most firms, because those firms would normally have such funds on hand to meet transactions needs anyway. C. If the required compensating balance is larger than the transactions balance the firm would ordinarily hold, then the effective cost of any loan requiring such a balance is increased. D. Banks are prohibited from earning interest on the funds they force businesses to keep as compensating balances. E. All of the above statements are correct. 83. Which of the following statements is correct? A. Depreciation is included in the estimate of cash flows (Cash flow = Net income + Depreciations), so depreciation is set forth on a separate line in the cash budget. B. If cash inflows and cash outflows occur on a regular basis, such as the situation where inflows from collections occur in equal amounts each day and most payments are made regularly on the 10th of each month, then it is not necessary to use a daily cash budget. A cash budget prepared at the end of the month will suffice. C. Lockboxes are more important for fast food retailers such as McDonald's which deal primarily with cash than for manufacturers such as Xerox which are generally paid by check. D. A concentration banking system should not be used by firms that collect customers' payments using lockbox arrangements. E. Statements a, b, c, and d are all false. 84. Which of the following statements is correct? A. A firm which makes 90 percent of its sales on credit and 10 percent for cash is growing at a rate of 10 percent annually. If the firm maintains stable growth it will also be able to maintain its accounts receivable at its current level, since the 10 percent cash sales can be used to manage the 10 percent growth rate. B. In managing a firm's accounts receivable it is possible to increase credit sales per day yet still keep accounts receivable fairly steady if the firm can shorten the length of its collection period. C. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm's receivables management needs to be reviewed and improved. D. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio should also have a high payables-to-sales ratio. 85. Which of the following statements is correct? A. If a firm's volume of credit sales declines then its DSO will also decline. B. If a firm changes its credit terms from 1/20, net 40 days, to 2/10, net 45 days, the impact on sales can't be determined because the increase in the discount is offset by the longer net terms which tends to reduce sales. C. The DSO of a firm with seasonal sales can vary because while the sales per day figure is usually based on the total annual sales, the accounts receivable balance will be high or low depending on the season. D. An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit. E. Aging schedules can be constructed from the summary data provided in the firm's financial statements. 86. Which of the following statements is correct? A. Other things held constant, the higher a firm's days sales outstanding (DSO), the better its credit department. B. A firm will relax its credit standards only if it expects bad debts will not increase because of the change. C. If a firm which sells on terms of "net 30" changes its policy and begins offering all customers terms of "2/10, net 30," and if no change in sales volume occurs, then the firm's DSO will probably increase. D. If a firm sells on terms of 2/10, net 30, and its DSO is 30 days, then its aging schedule would probably show some past due accounts. E. Statements a, b, c, and d are all false. 87. Which of the following would cause average inventory holdings to decrease, other things held constant? A. Fixed order costs double. B. The purchase price of inventory items decreases by 50 percent. C. The carrying cost of an item decreases (as a percent of purchase price). D. The sales forecast is revised downward by 10 percent. E. None of the above (all would cause average inventory to increase). 88. Which of the following activities will increase the short-term net cash flow for a firm? A. Increase a cash bonus for employees. B. Increase the firm's days sales outstanding ratio without an increase in sales. C. Write off old accounts receivable that are considered uncollectible. D. Increase the average amount of time the firm takes to pay accounts. E. Increase the time you allow the firm's customers to pay for goods. 89. The Danser Company expects to have sales of $30,000 in January, $33,000 in February, and $38,000 in March. If 20 percent of sales are for cash, 40 percent are credit sales paid in the month following the sale, and 40 percent are credit sales paid 2 months following the sale, what are the cash receipts from sales in March? A. $55,000 B. $47,400 C. $38,000 D. $32,800 E. $30,000 90. Jumpdisk Company writes checks averaging $15,000 a day, and it takes 5 days for these checks to clear. The firm also receives checks in the amount of $17,000 per day, but the firm loses three days while its receipts are being deposited and cleared. What is the firm's net float in dollars? A. $126,000 B. $75,000 C. $32,000 D. $24,000 E. $16,000 91. Chadmark Corporation's budgeted monthly sales are $3,000. Forty percent of its customers pay in the first month and take the 2 percent discount. The remaining 60 percent pay in the month following the sale and don't receive a discount. Chadmark's bad debts are very small and are excluded from this analysis. Purchases for next month's sales are constant each month at $1,500. Other payments for wages, rent, and taxes are constant at $700 per month. Construct a single month's cash budget with the information given and determine the average cash gain or (loss) during a typical month for Chadmark Corporation. A. $2,600 B. $800 C. $776 D. $740 E. $728 92. For the Prince Company, the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assume a 360-day year. If Prince's annual sales are $936,000, what is the firm's average accounts receivable balance? A. $104,000 B. $118,000 C. $156,000 D. $212,000 E. $260,000 93. Calculate the economic ordering quantity for Nashville Records Inc., given the following information: Sales = 15,000 units per year Sales price = $10 per unit Purchase price = $5 Carrying cost = 0.25 times inventory value Fixed cost per order = $1,000 A. 3,464 units B. 4,899 units C. 346 units D. 490 units E. 1,549 units 94. Ace Hardware's EOQ is 100 widgets, and it maintains a 50 unit safety stock. Which of the following is Ace's average inventory? A. 100 units B. 60 units C. 57.07 units D. 12.25 units E. 75 units 95. Cross Collectibles currently fills mail orders from all over the U.S. and receipts come in to headquarters in Little Rock, Arkansas. The firm's average accounts receivable (A/R) is $2.5 million and is financed by an 11 percent annual, simple interest bank loan. Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent. The annual cost of the system is $15,000. What is the estimated net annual savings to the firm from implementing the lockbox system? A. $500,000 B. $30,000 C. $60,000 D. $55,000 E. $40,000 96. Fullerton Wine Company is a retailer which sells vintage wines. The company has established a policy of reordering inventory every 30 days. A recently employed MBA has considered Fullerton's inventory problem from the EOQ model viewpoint. If the following constitute the relevant data, how does the current policy compare with the optimal policy? Ordering cost = $10 per order Carrying cost = 20% of purchase price Purchase price = $10 per unit Total sales for year = 1,000 units Safety stock = 0 A. Total costs will be the same, since the current policy is optimal. B. Total costs under the current policy will be less than total costs under the EOQ by $10. C. Total costs under the current policy exceed those under the EOQ by $3. D. Total costs under the current policy exceed those under the EOQ by $10. E. Cannot be determined due to insufficient information. 97. Bass Boats Inc. currently has sales of $1,000,000, and its days sales outstanding is 30 days. The financial manager estimates that offering longer credit terms would (1) increase the days sales outstanding to 50 days and (2) increase sales to $1,200,000. However, bad debt losses, which were 2 percent on the old sales, would amount to 5 percent on the incremental sales only (bad debts on the old sales would stay at 2 percent). Variable costs are 80 percent of sales, and Bass has a 15 percent receivables financing cost. What would the annual incremental pre-tax profit be if Bass extended its credit period? A. -$20,000 B. -$10,000 C. $0 D. $10,000 E. $20,000 98. Reston Inc. has expected sales of $17,000,000. While 10 percent of its customers pay cash, the remaining 90 percent pay on credit with 40 percent paying on Day 10, 30 percent paying on Day 20, 15 percent paying on Day 25, and 15 percent paying on Day 30. Assume that the cost of funds invested in receivables is 10 percent. Suppose that the firm's customers begin paying later, such that the new DSO increases to 24 days, that the firm uses a 360-day year, and that the firm's variable cost ratio is 80 percent. What is the additional interest cost to Reston of the additional investment in A/R caused by the delay in payment by its customers? A. $19,550 B. $24,438 C. $42,500 D. $78,625 E. $102,000 99. East Lansing Appliances East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. Refer to East Lansing Appliances. What would be the incremental bad debt losses if the change were made? A. $315,000 B. $260,500 C. -$260,500 (bad debt losses would decline) D. -$315,000 (bad debt losses would decline) E. $0 (no change would occur) 100. East Lansing Appliances East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. Refer to East Lansing Appliances. What would be the incremental cost of carrying receivables if this change were made? A. $108,750 B. -$116,250 (carrying costs would decline) C. $157,900 D. -$225,000 (carrying costs would decline) E. $260,500 101. East Lansing Appliances East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. Refer to East Lansing Appliances. What are the incremental pre-tax profits from this proposal? A. $181,250 B. $271,750 C. $256,250 D. $206,500 E. $231,250 102. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. What is the economic ordering quantity for chips? A. 12,088 B. 3,175 C. 6,243 D. 13,675 E. 8,124 103. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. If Aberwald holds a safety stock equal to a 30-day supply of chips, what is its average inventory level? A. 12,088 B. 3,175 C. 15,750 D. 13,675 E. 8,124 104. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. Assume that Aberwald holds a safety stock equal to a 30-day supply of chips. What is the maximum amount of inventory that Aberwald will have on hand at any time; that is, what will be the inventory level right after a delivery is made? A. 9,216 B. 3,175 C. 6,243 D. 13,675 E. 8,124 105. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. How many orders should Aberwald place during the year? A. 12 B. 25 C. 30 D. 40 E. 60 106. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. If the lead time for placing an order is 5 days, and Aberwald holds a safety stock equal to a 30-day supply of chips, then at what inventory level should an order be placed? A. 15,570 B. 3,175 C. 12,250 D. 13,675 E. 8,124 107. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. If Aberwald holds a safety stock equal to a 30-day supply of chips, what is Aberwald's minimum cost of ordering and carrying inventory? A. $28,500 B. $15,950 C. $68,440 D. $34,220 E. $47,693 108. Fashion Clothiers Inc. Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost. Refer to Fashion Clothiers Inc. What is the firm's EOQ? A. 26,833 B. 30,040 C. 43,987 D. 15,218 E. 21,456 109. Fashion Clothiers Inc. Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost. Refer to Fashion Clothiers Inc. What is Fashion Clothiers' minimum cost of ordering and holding inventory? A. $6,254 B. $10,733 C. $11,560 D. $13,563 E. $19,825 110. Fashion Clothiers Inc. Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost. Refer to Fashion Clothiers Inc. Now, suppose the manufacturer offers a discount of 0.5 percent for orders of at least 40,000 yards. Should Fashion Clothiers increase its ordering quantity to take the discount? A. Yes; it will save $827 if it takes the discount. B. No; it will $827 lose if it takes the discount. C. Yes; it will save $14,400 if it takes the discount. D. Yes; it will save $13,573 if it takes the discount. E. No; it will lose $13,573 if it takes the discount. Chapter 15--Managing Short-Term Assets Key 1. Firms hold cash balances in order to complete transactions that are necessary in business operations and as compensation to banks for providing loans and services. TRUE 2. Two of the primary motives for a firm to hold cash are the transaction motive and the precautionary motive. TRUE 3. A firm's target cash balance should be set as the smaller of (1) its transaction balance plus a precautionary (safety stock) balance or (2) its required compensating balance. FALSE 4. For a firm that makes heavy use of float, being able to forecast its collections and disbursement check clearings is essential. TRUE 5. Lockbox arrangements are one way for a firm to speed up the receipt of payments from customers. TRUE 6. Target cash balances are generally not affected by compensating balance requirements except during periods of high interest rates and tight money. FALSE 7. The primary purpose of compensating balances required of borrowers is to compensate the bank in the event the borrower defaults on the loan. FALSE 8. Fixed dividend preferred stock is a good candidate for marketable security holdings designed to provide liquidity because 70 percent of the dividends are excludable from taxable income, hence the preferred would provide a relatively high after-tax rate of return. FALSE 9. The term "interest rate price risk" refers to the probability that a firm will be unable to continue making interest payments on its debt. FALSE 10. The benefits of a sound cash management program are not sensitive to interest rates. FALSE 11. If there are large fluctuations in a firm's cash flows, or if there are large costs associated with selling securities, then the firm should hold relatively small average cash balances. FALSE 12. The average accounts receivables balance is determined jointly by the volume of credit sales and the days sales outstanding. TRUE 13. The four major elements in a firm's credit policy are (1) credit standards, (2) credit terms, (3) monitoring function, and (4) collection policy. TRUE 14. Credit associations and credit reporting agencies are two major sources of external credit information on credit customers. TRUE 15. If you receive some goods on April 1 with the terms 3/20, net 30, June 1 dating, it means that you will receive a 3 percent discount if the bill is paid on or before June 20 and that the full amount must be paid 30 days after receipt of the goods. FALSE 16. Offering trade credit discounts is costly to a firm and as a result, firms that offer trade discounts are usually those that are performing poorly and need cash quickly. FALSE 17. Inventory management focuses on three basic questions: (1) how many units to hold in stock, (2) how many units of each item to order, and (3) at what point to reorder. TRUE 18. The central goal of inventory management is to provide sufficient incentives to ensure that the firm never suffers a stock-out (i.e., runs out of an inventory item). FALSE 19. Inventory management is largely self-contained; that is, only minimum coordination among other departments such as sales, purchasing, and production is required for successful inventory management. FALSE 20. Generally, ordering costs are the single most important cost element in inventory management, because they are greater in magnitude than carrying costs. FALSE 21. The economic order quantity is that order quantity which results in the minimum ordering costs. FALSE 22. If the unit sales of a firm double, the optimal order quantity as determined by the EOQ model will also double. FALSE 23. If the forecasted sales or usage rate is not accurate, the EOQ model may not lead to efficient inventory management. TRUE 24. The ABC method of inventory classification helps management concentrate resources on those inventory items that are most critical to the firm's operations. TRUE 25. A just-in-time system of inventory control requires that manufacturers coordinate production with suppliers so that raw materials or components arrive just as they are needed in the production process. The main objective of such a system is to reduce carrying costs. TRUE 26. The primary motivation behind out-sourcing is to provide the firm with an alternative source of supply in the event that its primary supplier is unable to meet the firm's raw material or component needs. FALSE 27. A Eurodollar is a U.S. dollar deposited in a bank outside the United States. TRUE 28. Credit policy for the multinational firm is generally riskier due in part to the additional consideration of exchange rates and also due to uncertainty regarding the credit worthiness of many foreign customers. TRUE 29. Exchange rates influence a multinational firm's inventory policy because changing currency values can affect the value of inventory. TRUE 30. The threat of expropriation creates an incentive for the multinational firm to minimize inventory holdings and to bring in goods only as needed. TRUE 31. The credit period is length of time for which credit is granted; after that time, the credit account is considered delinquent. TRUE 32. The terms of credit include the length of the credit period and any cash discounts offered. TRUE 33. The collection policy refers to the procedures the firm follows to collect its credit accounts. TRUE 34. Two commonly used methods of monitoring receivables are the DuPont method and the aging schedule. FALSE 35. All else equal, firms that hold greater amounts of short-term assets are considered more risky than firms that hold grater amounts of long-term securities. FALSE 36. Short term assets generally earn a higher rate of return than long-term assets, making short term assets a more desirable investment than long-term assets. FALSE 37. The target cash balance is the minimum cash balance a firm desires to maintain in order to conduct business. TRUE 38. The net float is the difference between the disbursement float and the collections float. TRUE 39. If the carrying costs of inventory increase then the economic ordering quantity of inventory will increase to insure the firm minimizes the total inventory costs. FALSE 40. Synchronization of cash flows is an important cash management technique and effective synchronization can actually increase a firm's profitability. TRUE 41. Collections float offsets disbursement float. If a firm's collections float is greater than its disbursement float then a firm is said to operate with positive net float. FALSE 42. A lockbox plan is one method of speeding up the check-clearing process for customer payments and decreasing the firm's net float position. FALSE 43. A firm has a daily average collection of checks equal to $250,000. It takes the firm approximately 4 days to convert the funds into usable cash. Assume (1) a lockbox system could be employed which would reduce the cash conversion procedure to 21/2 days, and (2) the firm could invest any additional cash received at 6 percent after taxes. The lockbox system would be a good buy if it costs only $23,000 annually. FALSE 44. Borrowing and holding marketable securities are substitute financing alternatives, although the two strategies may have different costs. TRUE 45. Other things equal and held constant, a firm with an effective accounts receivable monitoring system, when compared with a firm without such a monitoring system, will likely have lower additional funds needed. TRUE 46. A firm's collection policy and the procedures it follows to collect accounts receivable play an important role in keeping its deferrables period short, although too strict a collection policy can result in outright losses due to non-payment. FALSE 47. In part because money has time value, cash sales are always more profitable and more valuable than credit sales. FALSE 48. Generally, the longer the normal inventory holding period of a customer the longer the credit period. One effect of extending the credit period to match the customer's merchandise holding period is to increase the customer's payables deferral period which actually serves to shorten the customer's cash conversion cycle. TRUE 49. If a firm's terms are 2/10, net 30 days, and its DSO is 28 days, we can be certain that the credit department is functioning efficiently and the percentage of past due accounts is minimal. FALSE 50. If your firm's DSO or aging schedule deteriorates from the first quarter of the year to the second quarter, this is a clear indication that your firm's credit policy has weakened. FALSE 51. If the average collection period or days sales outstanding is increasing the firm should consider easing its credit policy to allow credit to more of its customers. FALSE 52. Which of the following is (are) typically part of the cash budget? A. Payment lag. B. Payment for plant construction. C. Cumulative cash. D. All of the above. E. Only answers a and c above. 53. Which of the following statements concerning the cash budget is true? A. Depreciation expense is not explicitly included, but depreciation effects are implicitly included in estimated tax payments. B. Cash budgets do not include financial expenses such as interest and dividend payments. C. Cash budgets do not include cash inflows from long-term sources such as bond issues. D. Answers a and b above. E. Answers a and c above. 54. Which of the following actions in managing the cash account would, in general, either not be feasible or else not be consistent with the firm's wealth maximization objective? A. Increase synchronization of inflows and outflows. B. Use drafts for disbursing funds. C. Use a lockbox plan. D. Maintain an average balance which is equal to that required as a compensating balance or that which minimizes total cash management costs, whichever is lower. E. None of the above (all would be feasible and consistent actions). 55. A lockbox plan is A. A method for safe-keeping of marketable securities. B. Used to identify inventory safety stocks. C. A system for slowing down the collection of checks written by a firm. D. A system for speeding up a firm's collections of checks received. E. Not described by any of the above statements. 56. Which of the following investments is not likely to be a proper investment for temporarily idle cash? A. Commercial paper. B. Treasury bills. C. Recently issued long-term corporate bonds. D. Government bonds due shortly. E. AT&T bonds due within one year. 57. Which of the following is not a situation which might lead a firm to hold marketable securities: A. The firm has purchased a fixed asset which will require a large write-off of depreciable expense. B. The firm must meet a known financial commitment, such as financing an ongoing construction project. C. The firm must finance seasonal operations. D. The firm has just sold long-term securities and has not yet invested the proceeds in earning assets. E. None of the above (all of the situations might lead the firm to hold marketable securities). 58. Which of the following statements is correct? A. A lockbox system is an example of concentration banking. B. For a firm that has many divisions or plants operating over a wide geographic area, payables centralization offers little benefit. C. If a firm increases its disbursement float, its net float will also increase, other things held constant. D. There are no actions a firm can take to improve its synchronization of cash flows. E. A lockbox system does not affect collections float. 59. Analyzing days sales outstanding (DSO) and the aging schedule are two common methods for monitoring receivables. However, they can provide erroneous signals to credit managers when A. Customers' payments patterns are changing. B. Sales fluctuate seasonally. C. Some customers take the discount and others do not. D. Sales are relatively constant, either seasonally or cyclically. E. None of the above. 60. If easing a firm's credit policy lengthens the collection period and results in a worsening of the aging schedule then why do firms take such actions? A. It normally stimulates sales. B. To meet competitive pressures. C. To increase the firm's deferral period for payables. D. All of the above. E. Both a and b above. 61. Which of the following statements is correct? A. The optimal credit policy is determined primarily by the industry in which the firm operates and by current economic conditions. B. Normally, when a credit sale is made, inventory is reduced by the cost of goods sold and an equal amount is credited to accounts receivable. C. A typical business credit report provides sufficient information to eliminate the need for informed human judgment in the credit decision. D. A customer's credit quality is usually determined in terms of the probability of the customer's default. E. Computers have had a significant effect in increasing efficiency in the areas of payroll and inventory, but have had little impact in accounts receivable management. 62. In the text, the "red-line method" refers to A. The policy of drawing a red line around certain neighborhoods on a map and then refusing to sell on credit to people who live within those areas. B. Restrictions imposed by companies which insure credit risks. C. The use, in Dun & Bradstreet's reports, of a red line to show the maximum amount of credit which should be extended to a given customer; companies using this limit when they screen customers' orders are said to be using the "red-line method." D. A method of controlling inventories by drawing a red line on the inside of a bin. E. A method of controlling receivables by drawing a red line on invoices of companies that are expected to pay late. 63. Which of the following might be attributed to efficient inventory management? A. High inventory turnover ratio. B. Low incidence of production schedule disruptions. C. High total asset turnover. D. All of the above. E. Only answers a and c above. 64. Which of the following is not a reason for a firm to hold cash balances? A. To cover routine payments and collections. B. To earn high rates of interest. C. To meet compensating balance requirements of banks. D. To provide a safety stock in the event of unforeseen fluctuations into cash flows. E. To take advantage of bargain purchases that might arise. 65. A minimum checking account balance that a firm must maintain with bank to help offset the costs and services such as check clearing and cash management advice is called a ____ balance. A. transactions B. compensating C. precautionary D. speculative E. convertible 66. A cash balance that is held to enable the firm to take advantage of any bargain purchases that might arise is called a ____ balance. A. transactions B. compensating C. precautionary D. speculative E. convertible 67. A cash balance held in reserve for unforeseen fluctuation in cash flows is called a ____ balance. A. transactions B. compensating C. precautionary D. speculative E. cash 68. Having synchronized cash flows enables a firm to A. increase its cash balances. B. increase its bank loans. C. increase interest expense. D. increase profits. E. None of the above. 69. The value of checks that have been written and disbursed but have not been deducted from the account on which they were written is the ____ float. A. disbursement B. net C. collections D. balance E. deposit 70. The amount of checks that have been received and deposited but have not yet been made available to the account in which they were deposited is the ____ float. A. disbursement B. net C. collections D. balance E. deposit 71. What type of system allows a customer's bank to periodically transfer funds from its account to a selling firm's bank account for payment of bills? A. Disbursement agreement. B. Preauthorized debit system. C. Lockbox agreement. D. Concentration banking system. E. Zero-balance account. 72. Which of the following will help a firm accelerate the collection of customer's payments and the conversion of those payments into cash? A. Lockbox agreement. B. Preauthorized debit system. C. Concentration banking. D. All of the above. E. Only answers a and c. 73. ____ is a technique used to reduce float by having payments sent to post office boxes located near the customer. A. Postal deposit system B. Preauthorized debit system C. Concentration banking D. Lockbox arrangement E. Zero-balance account 74. Which of the following is one of the common methods used to control disbursements or cash outflows? A. Lockbox agreement. B. Zero-balance account. C. Concentration banking. D. All of the above. E. Only answers b and c. 75. Which of the following is not a reason for firms to own marketable securities? A. Marketable securities serve as a substitute for cash balances. B. Marketable securities offer a place to temporarily put cash balance to work earning a positive return. C. Marketable securities are used as a temporary investment to finance seasonal or cyclical operations. D. Marketable securities are used as a temporary investment to amass funds to meet financial requirements in the near future. E. Marketable securities are more liquid than cash balances. 76. A liquid asset is an asset can be sold in a ____ period of time at a price ____ its fair market value. A. relatively long; way below B. relatively long; near C. relatively short; way below D. relatively short; near E. None of the above. 77. A report showing how long accounts receivable have been outstanding is called what? A. Time line. B. Preauthorized debit system. C. Aging schedule. D. Cash discount. E. Credit period. 78. Which of the following statements is correct? A. Shorter term cash budgets, in general, are used primarily for planning purposes while longer term budgets are used for actual cash control. B. The cash budget and the capital budget are planned separately and although they are both important to the firm, they are independent of each other. C. Since deprecation is a non-cash charge, it does not appear on nor have an effect on the cash budget. D. The target cash balance is set optimally such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it is changed to reflect long-term changes in the firm's operations. E. The typical actual cash budget will reflect interest on loans and income from investment of surplus cash. These numbers are expected values and actual results might turn out differently. 79. Which of the following statements about cash management is false? A. Depreciation expense does not appear explicitly on the cash budget, but its tax effects are included. B. If cash flows are not uniform during the month, then weekly or perhaps daily cash budgets should be prepared rather than monthly budgets. C. Compensating balance requirements do not affect a firm's target cash balance. D. Cash management involves costs, and it is important to analyze whether the benefits received outweigh the costs incurred. E. The cash budget is the foundation of good cash management. 80. Which of the following statement completions is correct? If the yield curve is upward sloping, then a firm's marketable securities portfolio, assumed to be held for liquidity purposes, should be A. Weighted toward long-term securities because they pay higher rates. B. Weighted toward short-term securities because they pay higher rates. C. Weighted toward U.S. Treasury securities to avoid interest rate risk. D. Weighted toward short-term securities to avoid interest rate risk. E. Balanced between long- and short-term securities to minimize the effects of either an upward or a downward trend in interest rates. 81. Which of the following statements is correct? A. Poor synchronization of cash flows which results in high cash management costs can be partially offset by increasing disbursement float and decreasing collections float. B. The size of a firm's net float is primarily a function of its natural cash flow synchronization and how it clears its checks. C. Lockbox systems are used mainly for security purposes as well as to decrease the firm's net float. D. If a firm can speed up its collections and slow down its disbursements, it will be able to reduce its net float. E. A firm practicing good cash management and making use of positive net float will bring its check book balance as close to zero as possible, but must never generate a negative book balance. 82. Which of the following statements is correct? A. Compensating balance requirements apply only to businesses, not to individuals. B. Compensating balances are essentially costless to most firms, because those firms would normally have such funds on hand to meet transactions needs anyway. C. If the required compensating balance is larger than the transactions balance the firm would ordinarily hold, then the effective cost of any loan requiring such a balance is increased. D. Banks are prohibited from earning interest on the funds they force businesses to keep as compensating balances. E. All of the above statements are correct. 83. Which of the following statements is correct? A. Depreciation is included in the estimate of cash flows (Cash flow = Net income + Depreciations), so depreciation is set forth on a separate line in the cash budget. B. If cash inflows and cash outflows occur on a regular basis, such as the situation where inflows from collections occur in equal amounts each day and most payments are made regularly on the 10th of each month, then it is not necessary to use a daily cash budget. A cash budget prepared at the end of the month will suffice. C. Lockboxes are more important for fast food retailers such as McDonald's which deal primarily with cash than for manufacturers such as Xerox which are generally paid by check. D. A concentration banking system should not be used by firms that collect customers' payments using lockbox arrangements. E. Statements a, b, c, and d are all false. 84. Which of the following statements is correct? A. A firm which makes 90 percent of its sales on credit and 10 percent for cash is growing at a rate of 10 percent annually. If the firm maintains stable growth it will also be able to maintain its accounts receivable at its current level, since the 10 percent cash sales can be used to manage the 10 percent growth rate. B. In managing a firm's accounts receivable it is possible to increase credit sales per day yet still keep accounts receivable fairly steady if the firm can shorten the length of its collection period. C. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm's receivables management needs to be reviewed and improved. D. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio should also have a high payables-to-sales ratio. 85. Which of the following statements is correct? A. If a firm's volume of credit sales declines then its DSO will also decline. B. If a firm changes its credit terms from 1/20, net 40 days, to 2/10, net 45 days, the impact on sales can't be determined because the increase in the discount is offset by the longer net terms which tends to reduce sales. C. The DSO of a firm with seasonal sales can vary because while the sales per day figure is usually based on the total annual sales, the accounts receivable balance will be high or low depending on the season. D. An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit. E. Aging schedules can be constructed from the summary data provided in the firm's financial statements. 86. Which of the following statements is correct? A. Other things held constant, the higher a firm's days sales outstanding (DSO), the better its credit department. B. A firm will relax its credit standards only if it expects bad debts will not increase because of the change. C. If a firm which sells on terms of "net 30" changes its policy and begins offering all customers terms of "2/10, net 30," and if no change in sales volume occurs, then the firm's DSO will probably increase. D. If a firm sells on terms of 2/10, net 30, and its DSO is 30 days, then its aging schedule would probably show some past due accounts. E. Statements a, b, c, and d are all false. 87. Which of the following would cause average inventory holdings to decrease, other things held constant? A. Fixed order costs double. B. The purchase price of inventory items decreases by 50 percent. C. The carrying cost of an item decreases (as a percent of purchase price). D. The sales forecast is revised downward by 10 percent. E. None of the above (all would cause average inventory to increase). 88. Which of the following activities will increase the short-term net cash flow for a firm? A. Increase a cash bonus for employees. B. Increase the firm's days sales outstanding ratio without an increase in sales. C. Write off old accounts receivable that are considered uncollectible. D. Increase the average amount of time the firm takes to pay accounts. E. Increase the time you allow the firm's customers to pay for goods. 89. The Danser Company expects to have sales of $30,000 in January, $33,000 in February, and $38,000 in March. If 20 percent of sales are for cash, 40 percent are credit sales paid in the month following the sale, and 40 percent are credit sales paid 2 months following the sale, what are the cash receipts from sales in March? A. $55,000 B. $47,400 C. $38,000 D. $32,800 E. $30,000 90. Jumpdisk Company writes checks averaging $15,000 a day, and it takes 5 days for these checks to clear. The firm also receives checks in the amount of $17,000 per day, but the firm loses three days while its receipts are being deposited and cleared. What is the firm's net float in dollars? A. $126,000 B. $75,000 C. $32,000 D. $24,000 E. $16,000 91. Chadmark Corporation's budgeted monthly sales are $3,000. Forty percent of its customers pay in the first month and take the 2 percent discount. The remaining 60 percent pay in the month following the sale and don't receive a discount. Chadmark's bad debts are very small and are excluded from this analysis. Purchases for next month's sales are constant each month at $1,500. Other payments for wages, rent, and taxes are constant at $700 per month. Construct a single month's cash budget with the information given and determine the average cash gain or (loss) during a typical month for Chadmark Corporation. A. $2,600 B. $800 C. $776 D. $740 E. $728 92. For the Prince Company, the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assume a 360-day year. If Prince's annual sales are $936,000, what is the firm's average accounts receivable balance? A. $104,000 B. $118,000 C. $156,000 D. $212,000 E. $260,000 93. Calculate the economic ordering quantity for Nashville Records Inc., given the following information: Sales = 15,000 units per year Sales price = $10 per unit Purchase price = $5 Carrying cost = 0.25 times inventory value Fixed cost per order = $1,000 A. 3,464 units B. 4,899 units C. 346 units D. 490 units E. 1,549 units 94. Ace Hardware's EOQ is 100 widgets, and it maintains a 50 unit safety stock. Which of the following is Ace's average inventory? A. 100 units B. 60 units C. 57.07 units D. 12.25 units E. 75 units 95. Cross Collectibles currently fills mail orders from all over the U.S. and receipts come in to headquarters in Little Rock, Arkansas. The firm's average accounts receivable (A/R) is $2.5 million and is financed by an 11 percent annual, simple interest bank loan. Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent. The annual cost of the system is $15,000. What is the estimated net annual savings to the firm from implementing the lockbox system? A. $500,000 B. $30,000 C. $60,000 D. $55,000 E. $40,000 96. Fullerton Wine Company is a retailer which sells vintage wines. The company has established a policy of reordering inventory every 30 days. A recently employed MBA has considered Fullerton's inventory problem from the EOQ model viewpoint. If the following constitute the relevant data, how does the current policy compare with the optimal policy? Ordering cost = $10 per order Carrying cost = 20% of purchase price Purchase price = $10 per unit Total sales for year = 1,000 units Safety stock = 0 A. Total costs will be the same, since the current policy is optimal. B. Total costs under the current policy will be less than total costs under the EOQ by $10. C. Total costs under the current policy exceed those under the EOQ by $3. D. Total costs under the current policy exceed those under the EOQ by $10. E. Cannot be determined due to insufficient information. 97. Bass Boats Inc. currently has sales of $1,000,000, and its days sales outstanding is 30 days. The financial manager estimates that offering longer credit terms would (1) increase the days sales outstanding to 50 days and (2) increase sales to $1,200,000. However, bad debt losses, which were 2 percent on the old sales, would amount to 5 percent on the incremental sales only (bad debts on the old sales would stay at 2 percent). Variable costs are 80 percent of sales, and Bass has a 15 percent receivables financing cost. What would the annual incremental pre-tax profit be if Bass extended its credit period? A. -$20,000 B. -$10,000 C. $0 D. $10,000 E. $20,000 98. Reston Inc. has expected sales of $17,000,000. While 10 percent of its customers pay cash, the remaining 90 percent pay on credit with 40 percent paying on Day 10, 30 percent paying on Day 20, 15 percent paying on Day 25, and 15 percent paying on Day 30. Assume that the cost of funds invested in receivables is 10 percent. Suppose that the firm's customers begin paying later, such that the new DSO increases to 24 days, that the firm uses a 360-day year, and that the firm's variable cost ratio is 80 percent. What is the additional interest cost to Reston of the additional investment in A/R caused by the delay in payment by its customers? A. $19,550 B. $24,438 C. $42,500 D. $78,625 E. $102,000 99. East Lansing Appliances East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. Refer to East Lansing Appliances. What would be the incremental bad debt losses if the change were made? A. $315,000 B. $260,500 C. -$260,500 (bad debt losses would decline) D. -$315,000 (bad debt losses would decline) E. $0 (no change would occur) 100. East Lansing Appliances East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. Refer to East Lansing Appliances. What would be the incremental cost of carrying receivables if this change were made? A. $108,750 B. -$116,250 (carrying costs would decline) C. $157,900 D. -$225,000 (carrying costs would decline) E. $260,500 101. East Lansing Appliances East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. Refer to East Lansing Appliances. What are the incremental pre-tax profits from this proposal? A. $181,250 B. $271,750 C. $256,250 D. $206,500 E. $231,250 102. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. What is the economic ordering quantity for chips? A. 12,088 B. 3,175 C. 6,243 D. 13,675 E. 8,124 103. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. If Aberwald holds a safety stock equal to a 30-day supply of chips, what is its average inventory level? A. 12,088 B. 3,175 C. 15,750 D. 13,675 E. 8,124 104. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. Assume that Aberwald holds a safety stock equal to a 30-day supply of chips. What is the maximum amount of inventory that Aberwald will have on hand at any time; that is, what will be the inventory level right after a delivery is made? A. 9,216 B. 3,175 C. 6,243 D. 13,675 E. 8,124 105. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. How many orders should Aberwald place during the year? A. 12 B. 25 C. 30 D. 40 E. 60 106. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. If the lead time for placing an order is 5 days, and Aberwald holds a safety stock equal to a 30-day supply of chips, then at what inventory level should an order be placed? A. 15,570 B. 3,175 C. 12,250 D. 13,675 E. 8,124 107. Aberwald Corporation Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.) Refer to Aberwald Corporation. If Aberwald holds a safety stock equal to a 30-day supply of chips, what is Aberwald's minimum cost of ordering and carrying inventory? A. $28,500 B. $15,950 C. $68,440 D. $34,220 E. $47,693 108. Fashion Clothiers Inc. Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost. Refer to Fashion Clothiers Inc. What is the firm's EOQ? A. 26,833 B. 30,040 C. 43,987 D. 15,218 E. 21,456 109. Fashion Clothiers Inc. Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost. Refer to Fashion Clothiers Inc. What is Fashion Clothiers' minimum cost of ordering and holding inventory? A. $6,254 B. $10,733 C. $11,560 D. $13,563 E. $19,825 110. Fashion Clothiers Inc. Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost. Refer to Fashion Clothiers Inc. Now, suppose the manufacturer offers a discount of 0.5 percent for orders of at least 40,000 yards. Should Fashion Clothiers increase its ordering quantity to take the discount? A. Yes; it will save $827 if it takes the discount. B. No; it will lose $827 if it takes the discount. C. Yes; it will save $14,400 if it takes the discount. D. Yes; it will save $13,573 if it takes the discount. E. No; it will lose $13,573 if it takes the discount.

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USF - FIN - 3604
Chapter 14-Working Capital PolicyChapter 14-Working Capital PolicyStudent: _1. The fact that no explicit interest cost is paid on accruals and that the firm can exercise considerable control over their level makes accruals an attractive source of addit
USF - FIN - 3604
Chapter 13-Distribution of Retained Earnings: Dividends and Stock RepurchasesChapter 13-Distribution of Retained Earnings: Dividends and Stock Repurchases Student: _1. The dividend irrelevance theory, proposed by Miller and Modigliani, says that as long
USF - FIN - 3604
Chapter 12-Capital StructureChapter 12-Capital StructureStudent: _1. The optimal capital structure is that capital structure which strikes a balance between risk and return such that the firm's stock price is maximized. True False2. Business risk will
USF - FIN - 3604
Chapter 11-The Cost of CapitalChapter 11-The Cost of CapitalStudent: _1. Capital refers to items on the right-hand side of a firm's balance sheet. True False2. The component costs of capital are market-determined variables in as much as they are based
USF - FIN - 3604
Chapter 10-Project Cash Flows and RiskChapter 10-Project Cash Flows andRiskStudent: _1. If an investment project would make use of land which the firm currently owns, the project should be charged with the opportunity cost of the land. True False2. W
USF - FIN - 3604
Chapter 10 Appendix 10A-DepreciationChapter 10 Appendix 10A-DepreciationStudent: _1. The primary advantage of accelerated depreciation over straight line depreciation is that the total, undiscounted, depreciation tax savings over the life of the proje
USF - FIN - 3604
Chapter 1-An Overview of Managerial FinanceChapter 1-An Overview ofManagerial FinanceStudent: _1. In general, the role of the financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm. True False2. The
USF - FIN - 3604
CHAPTER 4: Income Statement and Related InformationUsefulness of the Income Statement Evaluate past performance. Predicting future performance Help assess the risk or uncertainty of achieving future cash flows.Limitations of the Income Statement 1. Comp
USF - FIN - 3604
CHAPTER 5: Balance Sheet and Statement of Cash FlowsUsefulness and Purpose of the Balance Sheet Provides information about the entity's Aids in assessing risk and predicting future cash flows Used to evaluate: o Liquidity: o o Solvency: CapitalStructure:
USF - FIN - 3604
CHAPTER 6Inventories0REVIEWING THE CHAPTERObjective 1: Explain the management decisions related to inventory accounting, evaluation of inventory level, and the effects of inventory misstatements on income measurement. 10. Inventory is considered a curr
USF - FIN - 3604
CHAPTER 5The Operating Cycle and Merchandising Operations0REVIEWING THE CHAPTERObjective 1: Identify the management issues related to merchandising businesses. 10. A merchandising business earns income by buying and selling goods, also known as merchan
USF - FIN - 3604
Chapter 8 Valuation of InventoriesInventory OverviewDefined - asset items held for sale in the ordinary course of business, or goods to be used in the production of goods to be soldoMerchandise InventoryoManufacturing InventoryInventory systems - u
USF - FIN - 3604
CHAPTER 5: Balance Sheet and Statement of Cash FlowsUsefulness and Purpose of the Balance Sheet Provides information about the entity's Aids in assessing risk and predicting future cash flows Used to evaluate: o Liquidity: o o Solvency: CapitalStructure:
USF - FIN - 3604
CHAPTER 6: Accounting and the Time Value of MoneyWhat is interest? Interest is the excess cash received or repaid over and above the principal Interest rates are generally stated on an Two types of interest: Simple Interest Interest is computed only on t
USF - FIN - 3604
Chapter 1An Overview of MarketingTRUE/FALSE 1. Marketing is defined as producing, promoting, and selling products. ANS: F Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that
USF - FIN - 3604
Chapter 2Strategic Planning for Competitive AdvantageTRUE/FALSE 1. The manufacturer of Macho brand martial arts products was implementing a strategic plan when it sponsored a local karate tournament for teenagers. ANS: F Such a short-range decision is ty
USF - FIN - 3604
Chapter 3Ethics & Social ResponsibilityTRUE/FALSE 1. Most people have not applied ethical standards in their everyday lives. ANS: F If youve experienced resentment at a line-cutter, youve applied ethical standards. PTS: 1 REF: 31 OBJ: 03-1 TYPE: Def TOP:
USF - FIN - 3604
Chapter 4The Marketing EnvironmentTRUE/FALSE 1. Marketers can control the external environment in which their organizations operate. ANS: F Although marketers can control the marketing mix and perhaps influence the external environment, they cannot contr
USF - FIN - 3604
Chapter 5Developing a Global VisionTRUE/FALSE 1. Having a global vision means management recognizes and reacts to international marketing opportunities, is aware of threats from foreign competitors in all markets. ANS: T PTS: 1 REF: 53 OBJ: 05-1 TYPE: De
USF - FIN - 3604
Chapter 6Consumer Decision MakingTRUE/FALSE 1. If consumer behavior is not well understood, a marketer will have difficulty creating an appropriate marketing mix. ANS: T PTS: 1 REF: 73 TOP: AACSB Reflective Thinking | TB&E Model Customer OBJ: 06-1 TYPE:
USF - FIN - 3604
Chapter 7Business MarketingTRUE/FALSE 1. Shimano sells the fishing and golfing equipment it manufactures to sporting goods stores, which in turn sell the equipment to anglers and golfers. Shimano is engaged in business marketing. ANS: T Business marketin
USF - FIN - 3604
Chapter 8Segmenting and Targeting MarketsTRUE/FALSE 1. Fisher-Price developed a line of toys for infants in China. Babies make up the market for these products. ANS: F Infants cant make purchases and, therefore, cannot be called a market. Their parents w
USF - FIN - 3604
Chapter 9Decision Support Systems and Marketing ResearchTRUE/FALSE 1. A marketing decision support system is an interactive, flexible computerized information system that bypasses information-processing specialists and gives managers access to useful inf
USF - FIN - 3604
Chapter 10Product ConceptsTRUE/FALSE 1. A product may be defined as everything, both favorable and unfavorable, that a person receives in an exchange. ANS: T PTS: 1 REF: 153 TOP: AACSB Reflective Thinking | TB&E Model Product OBJ: 10-1 TYPE: Def2. An el
USF - FIN - 3604
Chapter 11Developing and Managing ProductsTRUE/FALSE 1. A product must be a discontinuous innovation to be considered a new product. ANS: T There are six categories of new products, only one of which is new-to-the-world discontinuous innovative products.
USF - FIN - 3604
Chapter 12Services and Nonprofit Organization MarketingTRUE/FALSE 1. Insurance companies are examples of service organizations. ANS: T PTS: 1 REF: 183 TOP: AACSB Reflective Thinking | TB&E Model Product OBJ: 12-2 TYPE: App2. Services tend to exhibit mor
USF - FIN - 3604
Chapter 13Marketing ChannelsMULTIPLE CHOICE 1. A _ is a business structure of interdependent organizations that reaches from the point of product origin to the consumer. a. facilitating agency or place member b. marketing mix intermediary c. selective di
USF - FIN - 3604
Chapter 14Supply Chain ManagementTRUE/FALSE 1. Supply chain management is completely producer-driven. ANS: F Supply chain management is completely customer-driven. PTS: 1 REF: 213 OBJ: 14-1 TYPE: Def TOP: AACSB Reflective Thinking | TB&E Model Distributi
USF - FIN - 3604
Chapter 15RetailingTRUE/FALSE 1. Retailing can be defined as all activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use. ANS: T PTS: 1 REF: 227 OBJ: 15-1 TYPE: Def TOP: AACSB Reflective Thinki
USF - FIN - 3604
Chapter 16Integrated Marketing CommunicationsTRUE/FALSE 1. Promotion is communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence their opinion or elicit a response. ANS: T PTS: 1 REF: 245 TOP: AA
USF - FIN - 3604
Chapter 17Advertising and Public RelationsTRUE/FALSE 1. Spending on advertising varies by industry. ANS: T PTS: 1 REF: 261 TOP: AACSB Reflective Thinking | TB&E Model Promotion OBJ: 17-1 TYPE: Comp2. The advertising response function is a phenomenon in
USF - FIN - 3604
Chapter 18Sales Promotion and Personal SellingTRUE/FALSE 1. Sales promotion offers an incentive to buy. ANS: T PTS: 1 REF: 279 TOP: AACSB Reflective Thinking | TB&E Model Promotion OBJ: 18-1 TYPE: Comp2. Marketers find it much easier to evaluate the eff
USF - FIN - 3604
Chapter 19Pricing ConceptsTRUE/FALSE 1. Price is defined as the perceived value of a good or service that is exchanged for a certain dollar amount. ANS: F Price is not necessarily measured in terms of money. In bartering, other items of value may be exch
USF - FIN - 3604
Chapter 20Setting the Right PriceTRUE/FALSE 1. The first step in setting the right price for a new product is to estimate demand, costs, and profits. ANS: F The first step in setting the right price for a new product is to derive pricing goals from the f
USF - FIN - 3604
Chapter 21Customer Relationship Management (CRM)TRUE/FALSE 1. Customer relationship management (CRM) requires that organizations be organized around customer segments. ANS: T PTS: 1 REF: 329 TOP: AACSB Reflective Thinking | TB&E Model Customer 2. Technol
CSB-SJU - IS - 333
Ken Perry OrangeBasketSource Code;import java.util.Scanner;public class OrangeBasketcfw_ public static void main (String [] args) cfw_ int numberOfBaskets, orangesPerBasket, totalOranges, numberToRemove; String YourName = "Ken Perry"; numberToRem
Chippewa Valley - BS - 1
Database TestingTesting TableTest Number 1 Test Validation rule: New Cust_Title, customer details field. Enter of the word Sir. Is it possible to enter letters into the Card Number field in the customer details table? Is it possible to change the Order
Notre Dame - ACCT - 101
Chapter 10Standard Costs and the Balanced ScorecardSolutions to Questions10-1 A quantity standard indicates how much of an input should be used to make a unit of output. A price standard indicates how much the input should cost. 10-2 Ideal standards as
Minnesota - AEM - 2011
PROBLEM 2.5The 300-lb force is to be resolved into components along lines a-a and b-b. (a) Determine the angle by trigonometry knowing that the component along line a-a is to be 240 lb. (b) What is the corresponding value of the component along b-b?SOLU
Minnesota - AEM - 2011
PROBLEM 2.27The guy wire BD exerts on the telephone pole AC a force P directed along BD. Knowing that P must have a 120-N component perpendicular to the pole AC, determine (a) the magnitude of the force P, (b) its component along line AC.SOLUTION(a)P=
Minnesota - AEM - AEM2011
PROBLEM 2.41Determine (a) the required tension in cable AC, knowing that the resultant of the three forces exerted at Point C of boom BC must be directed along BC, (b) the corresponding magnitude of the resultant.SOLUTIONUsing the x and y axes shown:R
Minnesota - AEM - AEM2011
PROBLEM 2.44Two cables are tied together at C and are loaded as shown. Determine the tension (a) in cable AC, (b) in cable BC.SOLUTIONFree-Body Diagram Force TriangleLaw of sines: (a) (b)TAC T 500 N = BC = sin 60 sin 40 sin 80 TAC = TBC =500 N sin 6
Minnesota - AEM - AEM2011
PROBLEM 2.57For the cables of Problem 2.45, it is known that the maximum allowable tension is 600 N in cable AC and 750 N in cable BC. Determine (a) the maximum force P that can be applied at C, (b) the corresponding value of .SOLUTIONFree-Body Diagram
Minnesota - AEM - AEM2011
PROBLEM 2.65A 160-kg load is supported by the rope-and-pulley arrangement shown. Knowing that = 20, determine the magnitude and direction of the force P that must be exerted on the free end of the rope to maintain equilibrium. (Hint: The tension in the r
Minnesota - AEM - AEM2011
PROBLEM 2.68Solve Parts b and d of Problem 2.67, assuming that the free end of the rope is attached to the crate. PROBLEM 2.67 A 600-lb crate is supported by several rope-and-pulley arrangements as shown. Determine for each arrangement the tension in the
Minnesota - AEM - AEM2011
PROBLEM 2.74A horizontal circular plate is suspended as shown from three wires that are attached to a support at D and form 30 angles with the vertical. Knowing that the z component of the force exerted by wire BD on the plate is 32.14 N, determine (a) t
Minnesota - AEM - AEM2011
PROBLEM 2.83A force F of magnitude 210 N acts at the origin of a coordinate system. Knowing that Fx = 80 N, z = 151.2, and Fy < 0, determine (a) the components Fy and Fz, (b) the angles x and y.SOLUTION(a)Fz = F cos z = (210 N) cos151.2= 184.024 NFz
Minnesota - AEM - AEM2011
PROBLEM 2.93Knowing that the tension is 425 lb in cable AB and 510 lb in cable AC, determine the magnitude and direction of the resultant of the forces exerted at A by the two cables.SOLUTIONAB = (40 in.)i (45 in.) j + (60 in.)k AB = (40 in.) 2 + (45 i
Minnesota - AEM - AEM2011
PROBLEM 2.109A transmission tower is held by three guy wires attached to a pin at A and anchored by bolts at B, C, and D. If the tension in wire AB is 630 lb, determine the vertical force P exerted by the tower on the pin at A.SOLUTIONFree Body A :F =
Minnesota - AEM - AEM2011
PROBLEM 2.121A container of weight W is suspended from ring A. Cable BAC passes through the ring and is attached to fixed supports at B and C. Two forces P = Pi and Q = Qk are applied to the ring to maintain the container in the position shown. Knowing t
Minnesota - AEM - AEM2011
PROBLEM 3.3A 300-N force is applied at A as shown. Determine (a) the moment of the 300-N force about D, (b) the smallest force applied at B that creates the same moment about D.SOLUTION(a)Fx = (300 N) cos 25= 271.89 N Fy = (300 N) sin 25 = 126.785 N
Minnesota - AEM - AEM2011
PROBLEM 3.10It is known that a force with a moment of 960 N m about D is required to straighten the fence post CD. If d = 2.80 m, determine the tension that must be developed in the cable of winch puller AB to create the required moment about Point D.SO
Minnesota - AEM - AEM2011
PROBLEM 3.21A 200-N force is applied as shown to the bracket ABC. Determine the moment of the force about A.SOLUTIONWe have whereM A = rC/A FC rC/A = (0.06 m)i + (0.075 m) j FC = (200 N) cos 30 j + (200 N)sin 30kTheni j k 0.075 0 M A = 200 0.06 0 co
Minnesota - AEM - AEM2011
PROBLEM 3.39Consider the volleyball net shown. Determine the angle formed by guy wires AB and AC.SOLUTIONFirst noteAB = (6.5)2 + (8)2 + (2) 2 = 10.5 ft AC = (0) 2 + (8) 2 + (6)2 = 10 ftandAB = (6.5 ft)i (8 ft) j + (2 ft)k AC = (8 ft) j + (6 ft)kBy
Minnesota - AEM - AEM2011
PROBLEM 3.55The frame ACD is hinged at A and D and is supported by a cable that passes through a ring at B and is attached to hooks at G and H. Knowing that the tension in the cable is 450 N, determine the moment about the diagonal AD of the force exerte
Minnesota - AEM - AEM2011
PROBLEM 3.61A sign erected on uneven ground is guyed by cables EF and EG. If the force exerted by cable EF at E is 46 lb, determine the moment of that force about the line joining Points A and D.SOLUTIONFirst note that BC = (48) 2 + (36) 2 = 60 in. and
Minnesota - AEM - AEM2011
PROBLEM 3.79If P = 20 N, replace the three couples with a single equivalent couple, specifying its magnitude and the direction of its axis.SOLUTIONWe have wherei jk M1 = rG/C F1 = 0.3 0 0 N m = (5.4 N m)j 0 0 18 i j k F2 = .15 .08 0 141.421 N m .15 .0
Minnesota - AEM - AEM2011
PROBLEM 3.92A rectangular plate is acted upon by the force and couple shown. This system is to be replaced with a single equivalent force. (a) For = 40, specify the magnitude and the line of action of the equivalent force. (b) Specify the value of if the
Minnesota - AEM - AEM2011
PROBLEM 3.81The tension in the cable attached to the end C of an adjustable boom ABC is 560 lb. Replace the force exerted by the cable at C with an equivalent forcecouple system (a) at A, (b) at B.SOLUTION(a) Based on orM A : M A = (T sin 50)(d A ) =
Minnesota - AEM - AEM2011
PROBLEM 3.101A 4-m-long beam is subjected to a variety of loadings. (a) Replace each loading with an equivalent forcecouple system at end A of the beam. (b) Which of the loadings are equivalent?SOLUTION(a)(a)We haveFy : 400 N 200 N = Raor andM A :
Minnesota - AEM - AEM2011
PROBLEM 3.113A truss supports the loading shown. Determine the equivalent force acting on the truss and the point of intersection of its line of action with a line drawn through Points A and G.SOLUTIONWe haveR = F R = ( 240 lb)(cos 70i sin 70 j) (160