Chapter 19 Quiz A
Student Name _________________________
Student ID ____________
Which one of the following is a source of cash?
a. an increase in inventory
b. an increase in accounts payable
c. the purchase of a fixed asset
d. the payment of a long-term loan
A firm has an accounts payable period of 51 days, an inventory period of 38 days, and an accounts receivable
period of 32 days. What is the length of the cash cycle?
a. 13 days
b. 19 days
c. 32 days
d. 45 days
Peterson’s Nursery has sales of $640,000 and cost of goods sold equal to 60 percent of sales. The beginning
inventory is $54,000 and the ending inventory is $58,000. What is the length of the inventory period?
a. 31.94 days
b. 46.67 days
c. 49.08 days
d. 53.23 days
A flexible short-term financial policy is characterized by:
a. large investments in inventory.
b. low cash balances.
c. limited credit sales.
d. few, if any, investments in marketable securities.
Which one of the following is a cost related to the lack of safety reserves?
a. brokerage costs
b. lost sales
c. increased production setup costs
d. increased customer goodwill
A restrictive short-term financial policy:
a. tends to produce periodic cash surpluses which can be invested in marketable securities.
b. involves more long-term financing than does a flexible policy.
c. is also referred to as a compromise policy.
d. relies on short-term financing to fund seasonal fluctuations.
Your firm has projected quarterly sales of $900, $1,500, $1,600, and $2,000, respectively, for the next year
starting with the first quarter. The accounts receivable period is 60 days. How much will you collect in
Quarter 3? Assume that a year has 360 days.
Your firm has projected monthly sales of $800, $700, $1,100, and $1,300 for the months of January through
April, respectively. Your cost of goods sold is 70 percent of the selling price and your accounts payable
period is 30 days. You purchase goods one month prior to the month of sale. What are your cash
disbursements for March?
Banks frequently require a cleanup period of _____ days on their line of credit loans.
________ 10. You have a $60,000 line of credit with your local bank. The interest rate is 9 percent compounded quarterly.
The loan agreement requires that 5 percent of the unused amount be maintained at the bank in a non-interest