Exam 2 T2 2010 - Exam 2(non-proctored Term 2-2010 Students...

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Exam 2 (non-proctored) Term 2-2010 Students Name: Question 1 Since easing the credit policy generally lengthens the collection period and worsens the aging schedule, why do firms ever ease their credit policies? a. Easing normally stimulates sales. b. Easing helps them collect on sales quicker. c. Easing increases the deferral period for payables. d. Easing decreases the current ratio. e. Easing decreases the DSO. Question 2 Which of the following is generally true of firms that manage their inventories efficiently? a. They have a relatively low inventory turnover ratio. b. They have a relatively large number of production disruptions. c. They have a relatively low total assets turnover ratio. d. They have a relatively high cash conversion cycle. e. They have a relatively high inventory turnover ratio. Question 3 Which of the following statements regarding working capital policy is NOT CORRECT ? a. A company should hold a relatively large amount of cash or marketable securities, or have an adequate line of credit, if its sales tend to fluctuate in an uncertain manner. b. Because credit policy influences both sales and the average collection period, its credit policy affects a firm’s working capital position. c. The cash budget is useful when estimating a firm’s financing needs during the budget period. d. Carrying very low inventories reduces inventory carrying costs, but low inventories can result in lost sales and production stoppages. e. Working capital involves only current assets and current liabilities, hence a firm’s working capital policy plays no role in capital budgeting decisions.
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This note was uploaded on 01/05/2012 for the course 101 melissa jo taught by Professor Acc101 during the Spring '11 term at Aarhus Universitet.

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Exam 2 T2 2010 - Exam 2(non-proctored Term 2-2010 Students...

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