·
Q1

Which of the following statements is CORRECT?

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Question 2

2 out of 2 points

Which of the following is NOT a
situation that might lead a firm to increase its holdings of short-term
marketable securities?

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Question 3

2 out of 2 points

Data on Wentz Inc. for 2008 are shown below, along with the payables
deferral period (PDP) for the firms against which it benchmarks. The firm’s
new CFO believes that the company could delay payments enough to increase its
PDP to the benchmarks’ average. If this were done, by how much would payables
increase? Use a 365-day year.

Cost of goods sold =

$75,000

Payables =

$
5,000

Payables deferral period (PDP) =

24.33

Benchmark payables deferral period =

30.00

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Question 4

2 out of 2 points

Romano Inc. has the following data. What is the firm’s cash conversion
cycle?

Inventory conversion period =

38 days

Average collection period =

19 days

Payables deferral period =

20 days

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Question 5

0 out of 2 points

Whittington Inc. has the following data. What is the firm’s cash
conversion cycle?

Inventory conversion period =

41 days

Average collection period =

31 days

Payables deferral period =

38 days

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Question 6

2 out of 2 points

Helena Furnishings wants to reduce its
cash conversion cycle. Which of the following actions should it take?

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Question 7

2 out of 2 points

Edwards Enterprises follows a moderate current
asset investment policy, but it is now considering a change, perhaps to a
restricted or maybe to a relaxed policy. The firm’s annual sales are
$400,000; its fixed assets are $100,000; its target capital structure calls
for 50% debt and 50% equity; its EBIT is $35,000; the interest rate on its
debt is 10%; and its tax rate is 40%. With a restricted policy, current
assets will be 15% of sales, while under a relaxed policy they will be 25% of
sales. What is thedifference in the projected ROEs between the
restricted and relaxed policies?

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Question 8

2 out of 2 points

Zarruk Construction’s DSO is 50 days (on a
365-day basis), accounts receivable are $100 million, and its balance sheet
shows inventory of $125 million. What is the inventory turnover ratio?

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Question 9

2 out of 2 points

Desai Inc. has the following data, in thousands. Assuming a 365-day
year, what is the firm’s cash conversion cycle?

Annual sales =

$45,000

Annual cost of goods sold =

$30,000

Inventory =

$
4,500

Accounts receivable =

$
1,800

Accounts payable =

$
2,500

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Question 10

2 out of 2 points

Which of the following statements is most consistent with
efficient inventory management? The firm has a

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Question 11

2 out of 2 points

Cass & Company has the following data. What is the firm’s cash
conversion cycle?

Inventory conversion period =

50 days

Average collection period =

17 days

Payables deferral period =

25 days

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Question 12

2 out of 2 points

Bumpas Enterprises purchases $4,562,500 in goods
per year from its sole supplier on terms of 2/15, net 50. If the firm chooses
to pay on time but does not take the discount, what is the effective
annual percentage cost
of its non-free trade credit? (Assume a
365-day year.)

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Question 13

2 out of 2 points

Kirk Development buys on terms of 2/15, net 60 days.
It does not take discounts, and it typically pays on time, 60 days after the
invoice date. Net purchases amount to $550,000 per year. On average, what is
the dollar amount of total trade credit (costly + free) the firm receives
during the year, i.e., what are its average accounts payable? (Assume a
365-day year, and note that purchases are net of discounts.)

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Question 14

2 out of 2 points

Other things held constant, which of the following
would tend to reduce the cash conversion cycle?

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Question 15

2 out of 2 points

Edison Inc. has annual sales of $36,500,000, or
$100,000 a day on a 365-day basis. The firm’s cost of goods sold is 75% of
sales. On average, the company has $9,000,000 in inventory and $8,000,000 in
accounts receivable. The firm is looking for ways to shorten its cash
conversion cycle. Its CFO has proposed new policies that would result in a
20% reduction in both average inventories and accounts receivable. She also
anticipates that these policies would reduce sales by 10%, while the payables
deferral period would remain unchanged at 35 days. What effect would these
policies have on the company’s cash conversion cycle? Round to the nearest
whole day.