1. Marie Company ships products throughout the country. The company has determined that by establishing local collection centers around the country, it can speed up the collection of payments by two and one-half days. Furthermore, the cash management department of their bank has indicated that they can defer the company’s payments on its accounts by two days without affecting suppliers. The bank has a remote disbursement center in Florida. If the company has $5 million per day in collections and $3 million per day in disbursements, how many dollars will the cash management system free up?
4. Nowlin Pipe & Steel has projected sales of 72,000 pipes this year, an ordering cost of $6 per order, and carrying costs of $2.40 per pipe. What is the economic ordering quantity?
5. Harvard Co. has annual credit sales of $2,007,500 and an average collection period of 35 days in 2015. Assume a 365-day year. What is the company’s average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period.
6. Howe Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of $4 per order, and carrying costs of $1.008 per unit. How many orders will be placed during the year?
7. The term structure of
interest rates
A. is an indication of investors' expectations about inflation and
future interest rates.
B. will be downward sloping if short-term interest rates are higher
than long-term rates.
C. will be upward sloping under normal conditions.
D. all of these.
8. An inverted yield curve would
suggest that
A. interest rates are expected to rise.
B. interest rates are expected to fall.
C. inflation is expected to rise in the future.
D. long-term rates are being pushed up by federal reserve
policy.
9. Genetech has $4,000,000 in
assets, have decided to finance 30% with long-term financing (9%
rate) and 70% with short-term financing (7%) rate. What will be
their annual interest costs?
A. $78,000
B. $126,000
C. $440,000
10. Masters Machine Tool expects total sales
of $60,000. The price per unit is $10. The firm estimates an
ordering cost of $25 per order, with an inventory cost of $0.70 per
unit. What is the optimum order size?
11. If a
company can implement cash management systems and save 3 days by
reducing remittance time and 1 day by increasing disbursement time
based on $2,000,000 in average daily remittances and $2,500,000 in
average daily disbursements and their return on freed up funds is
10%, what is the max they should spend on the system?
A. $2,000,000
B. $650,000
C. $850,000
D. $1,000,000
12. All of the
following are examples of carrying costs except:
A. interest expense
B. warehouse space
C. shipping costs
D. insurance premiums
13. Monarck King Size Beds, Inc., is evaluating a new promotional campaign that could increase sales. Possible outcomes and probabilities of the outcomes are shown below. Compute the expected value.
Possible |
Additional Sales in Units |
Probabilities |
Ineffective campaign.................. |
20 |
.20 |
Normal response........................ |
30 |
.50 |
Extremely effective..................... |
70 |
.30 |
14. When actual sales are
greater than forecasted sales
A. inventory will decline.
B. production schedules might have to be revised upward.
C. accounts receivable will rise.
15. ABC Co. has an average collection period of 60 days. Total credit sales for the year were $2,400,000.What is the balance in accounts receivable at year-end?
1. Marie Company ships products throughout the country. The company has determined that by establishing local collection...
8. Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon...
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If City Farm has $4.90 million per day in...
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by two days because of these policies. Excess funds are being invested in short- term instruments yielding 5 percent per annum. a. If City Farm has $4.25 million per day in collections...
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light...
7. City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum. a. If City Farm has $4.45 million per day in collections and...
Aurora Electrical Company of Yellowknife ships wind turbines throughout the country. Mr. Beam, the financial manager, has determined that through the establishment of local collection centres around the country, he can speed up the collection of payments by three days. Furthermore, the cash management department of the company's bank has indicated to him that he can defer payments on his accounts by one day without offending suppliers. The bank has a remote disbursement centre in New Brunswick a. If Aurora...
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. (a) If Neon Light...
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. If Neon Light Company...
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the col one-half day without affecting suppliers. The bank has a remote disbursement center in Florida a. If Neon Light Company has $2.25 million per day in collections and $105 million per day in disbursements, how many dllars will the of payments by three days re, the...
Darla’s Cosmetics has annual credit sales of $1,314,000 and an average collection period of 45 days in 2008. What is the company’s average accounts receivable balance? (Use a 360-day year.)