The aggressive approach to the financing of a firm's

current assets uses a ____ proportion of short-term B. relatively high, relatively low
debt and a ____ proportion of long-term debt.

All other things being equal, a policy of financing its

assets with a relatively ____ proportion of short-term
debt will tend to result in ____ expected after-tax D. large, higher
earnings for the firm.

All other things being equal, a policy of financing its

assets with a relatively ____ proportion of short-term
debt will tend to ____ the variability (or risk) of the D. Large, increase
after-tax earnings of the firm.

All other things being equal, a policy of holding a relatively ____

B. Small, higher
proportion of the firm's total assets in the form of current assets
will tend to result in a ____ expected profitability or rate of return
on the total assets of the firm.

All other things being equal, a policy of holding a

relatively ____ proportion of the firm's total assets in
the form of current assets will tend to result in a ____ B. Small, higher
risk of the firm encountering financial difficulties.

An anticipated need for short-term

D. a cash budget
borrowed funds is best shown in

The ____ assets are those that are

affected by the seasonal or cyclical C. fluctuating current
nature of company sales.

Basically the overall working capital

policy decision involves a ____ of A. profit-risk tradeoff
alternative policies.

Borrowers (e.g., business firms) feel that there is A. uncertainty arising from interest rate
more risk associated with short-term debt (as fluctuations and B. risk of being unable
compared with long-term debt) because of the to refund the debt

Computerized financial planning models

may be classified as any of the following B. Optimistic
except:
Crystal Oil has $9 million in accounts payable, $1.8 in salaries
and taxes payable, and $10.4 in other current liabilities. If Crystal
Oil had a cost of sales of $54 million and selling, general, and
administrative expense of $18 million, what is the length of its
C. 54.75 days
payables deferral period?

A firm's cash conversion cycle is

equal to its operating cycle minus its
C. payables deferral period

The firm's inventory conversion period

(measured in days) is equal to its C. cost of sales/365
average inventory divided by its

A firm's net working capital position

is a widely used measure of its ____.
C. Risk

A firm's operating cycle is A. inventory conversion period

equal to its ____. plus receivables conversion period

The firm's receivables conversion period

(measured in days) is equal to its A. annual credit sales/365
accounts receivable divided by its ____.

Great Skot expects to have cash receipts in June of $532,160.

Skot's cash disbursements in June are $581,720, including an
interest payment on a bond issue of $32,000. If Skot wishes to
maintain a cash balance of $40,000, how much will Skot have to
D. $37,560
borrow if it started the month with a cash balance of $52,000?

Historically, the yield curve has generally been

____, which indicates that long-term interest rates C. upward sloping, higher than
usually have been ____ short-term interest rates.

If a firm shows a profit on the D. All the above may be

quarterly income statement, then correct

If a firm uses only short-term debt to finance the

fluctuating level of current assets, the firm is said C. matching
to be using the ____ approach to asset financing.
If Swatch's inventory conversion period is 45 days, its
payables deferral period is 35 days, and its
receivables conversion period is 50 days, then its A. 60
cash conversion cycle must be ____ days.

The ____ is the optimal working capital investment and financing policy

a.

D. Non of the above

aggressive policy
b.
moderate policy
c.
conservative policy
d.
none of the above

Laserscope has an inventory conversion period of

45 days, a receivables conversion period of 42 days,
and a payables deferral period of 51 days. What is B. 36 days
the length of its cash conversion cycle?

Last year Bizmart had credit sales of $32 million and

a net profit margin of 8%. If Bizmart had accounts
receivable of $4.5 million, what was the length of the A. 51.3 days
receivables conversion period?

Lenders normally feel that the relative

risk associated with short-term debt is ____ A. lower than
the risk associated with long-term debt.

The length of the operating cycle for A. payables deferral period

a firm is equal to the length of the and B. cash conversion cycle

The length of the operating cycle A. inventory conversion period and

is equal to the length of the B. receivables conversion period

Linear Technology had sales (all on credit) of $36 million and a

D. 107.2 days
gross profit margin of 30% last year. If Linear Technology's
inventory averaged $3.9 million, and its accounts receivable
were $5.0 million, what was the length of its operating cycle?

Many ____ contain provisions requiring

A. loan agreements with commercial
firms to maintain a minimum net working
banks and B. bond indentures
capital provision

Net working capital is defined B. current assets minus current

as: liabilities
 A. The amount of current assets
Net working capital
financed by noncurrent sources of
represents: funds.

Of the accounts listed, the account(s)

that is (are) NOT part of a firm's working A. plant and equipment
capital is:

The operating cycle begins with C. purchases of resources,

the ____ and ends with the ____. receipt of cash

The optimal level of working capital

C. maximize shareholder
investment is the level that is expected
to wealth

The rate of return on fixed assets is normally

assumed to be ____ the rate of return on current assets B. greater than
(especially cash and marketable securities).

The relationship between the maturity

A. term structure of interest
of debt and its associated cost (interest
rate) is referred to as rates

The relationship between the maturity

A. term structure of interest
of debt and its associated cost (interest
rate) is referred to as the rates

Runners Ink, Inc. had sales last year of $700,000 and 35 percent

C. $47,370
of its sales are for cash, with the remainder buying on terms of
net 30 days. If the receivables conversion period is actually 38
days, what is Runners Ink's accounts receivable?

Sherwood Packing had sales of $3.2 million and a

gross profit margin of 35% last year. If Sherwood's
inventory averaged $0.4 million last year, what was B. 70.2 days
the length of the inventory conversion period?

The ____ shows the time interval over which additional

non-spontaneous sources of working capital
financing must be obtained to carry out the firm's B. Cash conversion cycle
activities.
The size and nature of a firm's investment in current
assets is a function of a number of different factors
A. how efficient the firm
including all of the following except manages its fixed assets

The size of a firm's investment in current

assets is a function of all of the D. stockholders equity
following factors except

Tefft Industries has an average inventory of $170,000,

sells on terms of 2/10, net 30, and its cost of sales is
$540,000. What is Tefft's inventory conversion B. 115 days
period?

Under a conservative approach to working capital

management, a firm tends to hold a relatively ____
proportion of its total assets in the form of current D. Large
assets.

What is the inventory conversion period for O'Brian's

if it has sales of $320,000, an average inventory of
$5,333, and a cash conversion cycle of 20 days? c. 13.5 days
Assume that the cost of sales is 55 percent of sales.

What is the length of the cash conversion cycle for a

firm with annual sales (all cash) of $280,000, an
inventory conversion period of 35 days, and a C. 10 days
payables deferral period of 25 days.

When the level of working capital is

B. expected profitability
increased, all of the following are
expected to occur except. increases

Which of the following assets (if any) are

not part of a firm's working capital D. None of the above
investment?
Which of the following factors affect the firm's level of investment in working capital?

a. the length of the firm's operating cycle

b. the firm's sales level
D. All of the above
c. the firm's inventory and credit policies
d. all of the above

Which of the following factors does not

B. the age of the firm's plant
directly affect the firm's level of
investment in working capital? and equipment
 Which of the following working capital
C. financing permanent current
financing policies subjects the firm to
the greatest risk? assets with short-term debt

With the matching approach to meeting the

D. long-term debt and equity
financing needs of the firm, fixed and
permanent current assets are financed with funds