Revision Questions_FIN201

1) A bond may be issued by ________.

A) companies
B) state governments
C) the federal government
D) All of the above

2) A bond is a ________ instrument by which a borrower of funds agrees to pay back the funds with
interest on specific dates in the future.
A) long-term equity
B) long-term debt
C) short-term debt
D) short-term equity

3) Bonds are sometimes called ________ securities because they pay set amounts on specific future dates.
A) variable-income
B) fixed-income
C) bully
D) real

4) The ________ is the annual coupon payment divided by the current price of the bond, and is not
always an accurate indicator.
A) current yield
B) yield to maturity
C) bond discount rate
D) coupon rate

5) The ________ is the yield an individual would receive if the individual purchased the bond today and
held the bond to the end of its life.
A) current yield
B) yield to maturity
C) prime rate
D) coupon rate

6) The four steps to determining the price of a bond are:

A) determine the amount and timing of the present cash flows, determine the appropriate discount rate,
find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of
the principal and coupons.
B) determine the amount and timing of the future cash flows, determine the appropriate discount rate,
find the future value of the lump-sum principal and the annuity stream of coupons, and add the FVs of
the principal and coupons.
C) determine the amount and timing of the future cash flows, determine the appropriate discount rate,
find the present value of the lump-sum principal and the annuity stream of coupons, and multiply the
PVs of the principal and coupons.
D) determine the amount and timing of the future cash flows, determine the appropriate discount rate,
find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of
the principal and coupons.
7) Blackburn Inc. has issued 30-year $1,000 face value, 10% annual coupon bonds, with a yield to maturity
of 9.0%. The annual interest payment for the bond is ________.
A) $100
B) $90
C) $50
D) $45

8) Johnson Construction Inc. has issued 20-year $1,000 face value, 8% annual coupon bonds, with a yield
to maturity of 10%. The current price of the bond is ________.
A) $1,000.00
B) $1,196.36
C) $829.73
D) There is not enough information to answer this question.

9) Petty Productions Inc. recently issued 30-year $1,000 face value, 12% annual coupon bonds. The market
discount rate for this bond is only 7%. What is the current price of this bond?
A) $387.59
B) $597.24
C) $1,000.00
D) $1,620.45

10) The ________ is the face value of the bond.

A) coupon rate
B) maturity date
C) par value
D) coupon

11) The ________ is the regular interest payment of the bond.

A) dividend
B) par
C) coupon rate
D) coupon

12) The ________ is the return the bondholder receives on the bond if held to maturity.
A) coupon
B) coupon rate
C) yield to maturity
D) par rate

13) The ________ is the expiration date of the bond.

A) future value
B) yield to maturity
C) maturity date
D) coupon
14) Five years ago, Thompson Tarps Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000
face value each. Since then, interest rates in general have risen and the yield to maturity on the Thompson
bonds is now 12%. Given this information, what is the price today for a Thompson Tarps bond?
A) $843.14
B) $850.61
C) $1,181.54
D) $1,170.27

15) Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face
value each. Since then, interest rates in general have fallen and the yield to maturity on the Bacon bonds
is now 7%. Given this information, what is the price today for a Bacon Signs bond?
A) $1,000
B) $1,116.54
C) $1,091.08
D) $914.41

16) Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face
value each. Since then, interest rates in general have risen and the yield to maturity on the Bacon bonds is
now 9%. Given this information, what is the price today for a Bacon Signs bond?
A) $1,000
B) $919.39
C) $901.77
D) $1.085.59

17) The appropriate rate to use to discount the cash flows of a bond in order to determine the current
price is the ________.
A) yield to maturity
B) coupon rate
C) par rate
D) current yield

18) Fifteen years ago TravelEasy Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000 face
value each. Since then, interest rates in general have fallen and the yield to maturity on the firm's bonds is
now 6%. Given this information, what is the price today for a TravelEasy bond?
A) $1,000
B) $1,294.40
C) $1,091.08
D) $914.41

19) Twenty years ago JeffCo Inc. issued thirty-year 9% annual coupon bonds with a $1,000 face value
each. Since then, interest rates in general have risen and the yield to maturity on the firm's bonds is now
11%. Given this information, what is the price today for a bond from this issue?
A) $1,000
B) $1,116.54
C) $882.22
D) $914.41

20) Stocks are different from bonds because ________.

A) stocks, unlike bonds, are major sources of funds
B) stocks, unlike bonds, represent residual ownership
C) stocks, unlike bonds, give owners legal claims to payments
D) bonds, unlike stocks, represent voting ownership

21) Stocks differ from bonds because:

A) bond cash flows are known while stock cash flows are uncertain.
B) firms pay bond cash flows prior to paying taxes while stock cash flows are after tax.
C) the ending par value of a bond is known at purchase while the ending value of a share of stock is
unknown at purchase.
D) All of the above

22) Bonds are different from stocks because ________.

A) bonds promise fixed payments for the length of their maturity
B) bonds give payments only after other owners are paid
C) bonds do not have maturity dates
D) bonds promise growth in earnings

23) Which of the statements below is FALSE?

A) The profits for common stock owners come before payment to employees, suppliers, government, and
creditors.
B) Shareholders elect the board of directors, which ultimately selects the management team that runs the
day-to-day operations of the company.
C) Stock is a major financing source for public companies.
D) Common stock's ownership claim on the assets and cash flow of a company is often referred to as a
residual claim.

24) Which of the statements below is FALSE?

A) For common stock, there is no maturity date and the promised cash flow is not stated on the asset, but
is determined at a later date by the board of directors.
B) An equity claim is a claim to all the assets and cash flows of a company once debt claimants have been
paid.
C) Like a bond, common stock entitles the owner to some of the cash flow of a company.
D) Bond ownership gives the right to participate in the management of the company.

25) Which of the statements below is TRUE?

A) The profits for common stock owners come after payment to the employees, suppliers, government,
and creditors.
B) Shareholders elect the board of directors, which ultimately selects the bondholder team that runs the
day-to-day operations of the company.
C) Stock is a minor financing source for public companies.
D) Stockholders are paid before debt holders (bondholders) if a company fails.
26) Which of the statements below is FALSE?
A) Common stock usually carries the right to participate in the management of the firm through the right
to vote for the members of the Board of Directors and for changes to the charter and bylaws of the
company.
B) Shareholders with super voting right shares have multiple votes per share – a fact that increases their
influence and control over the company.
C) Some firms issue several classes of common stock, and these classes may have unequal voting rights.
D) The standard of one vote for each share cannot be altered.

27) There are two typical ways to alter the one vote-one share standard. One way is ________.
A) to have companies buy back nonvoting common stock
B) to not have companies pay dividends
C) to have companies issue classes of stock whereby one or more classes have super voting rights
D) to not have companies issue bonds

28) A typical practice of many companies is to distribute part of the earnings to shareholders through
________.
A) quarterly stock splits
B) quarterly cash dividends
C) semiannual cash dividends
D) annual stock dividends

29) Which of the statements below is FALSE?

A) The payment of cash dividends to shareholders is a deductible expense for the company.
B) Unlike coupon payments on bonds, which are treated as an interest expense of the firm, common stock
dividends are considered a return of capital to shareholders and not an expense of the firm.
C) For the shareholder, receipt of dividends is a taxable event.
D) A typical practice of many companies is to distribute part of the earnings to shareholders through cash
dividends.

30) Which of the statements below is FALSE?

A) If an investor purchases 20% of the initial issue of the company, the investor then owns 20% of the
company, given the one vote-one share norm.
B) After an initial offering, the company can sell more shares to the public at a later date. If the investor
who originally purchased 20% does not purchase 20% of the subsequent issue, his or her ownership is
diluted below 20%.
C) A preemptive right enables one to maintain one's proportional level of ownership.
D) A preemptive right is never particularly valuable to shareholders with large ownership percentages.

31) Common stock is a vehicle for selling ownership and another way to raise money for operations,
expansion, or other business needs.

32) Like a bond, common stock provides no specific promise of when and how much you will receive.
33) A privilege that allows current shareholders to buy a fixed percentage of all futures issues before they
are offered to the public is called a primary right.

34) Even though a company sets a limit on the number of shares it will sell, before selling any of them, the
company must receive authorization to market the shares from the Securities and Exchange Commission
(SEC).

35) The shares that are available for public purchase and subsequent trading in a secondary market such
as the NYSE or NASDAQ are the issued shares of the company.

36) Describe two basic rights that stock ownership gives.

37) Define treasury shares, distinguishing between treasury shares and outstanding shares. Is a company
limited in treasury shares that it may own? Briefly explain.

38) The ________ is the market of first sale in which companies first sell their authorized shares to the
public.
A) primary market
B) secondary market
C) both primary and secondary markets
D) Nasdaq market

39) You can think of the ________ as the "used stock" market because these shares have been owned or
"used" previously.
A) secondary market
B) primary market
C) NYSE market
D) initial public offering market

40) Which of the statements below is FALSE?

A) Selling of shares is the selling of ownership in the company.
B) A company is said to go "public" when it opens up its ownership structure to the general public
through the sale of common stock.
C) Companies choose to sell stock to attract permanent financing through equity ownership of the
company.
D) Most companies have the resident expertise to complete an initial public offering (IPO) or first public
equity issue.
41) The hiring process for an investment banker can happen in two ways. Which of the below is one of
these ways?
A) Randomly choose an investment banking firm from a list of underwriting firms.
B) Pick a desirable investment banking firm, usually basing the choice on the reputation and history of
the banker in its particular industry.
C) Have the primary government regulator of your industry choose the best investment banking firm for
your company.
D) Solicit advice from a government agency and use it as your primary guide in choosing an investment
banker.

42) Part of the negotiation with the investment banker during the selection process has to do with how
the investment banker will be compensated for taking the company public. One of these two standard
compensation packages involves ________.
A) a firm-commitment approach, in which the investment banker essentially buys the entire stock issue
from the company at several prices
B) a best efforts approach, in which the investment banker pledges to do his or her best to sell the shares
and will take a small percentage of the sale of each stock
C) a best efforts approach, in which the investment banker essentially buys the entire stock issue from the
company at one price and then sells the issue at the auction for a higher price
D) a firm-commitment approach, in which the investment banker pledges to do his or her best to sell the
shares and will take a small percentage of the sale of each stock
43) Which of the statements below is FALSE?
A) The secondary market, or "used stock" market, provides a place for current common stockholders to
sell their stock or acquire more stock or for new stockholders to acquire stock for the first time.
B) Both the NYSE and the NYSE MKT LLC (previously known as the AMEX) are physical trading
locations with trading floors. In order to complete a trade (the selling or buying of shares), orders must be
processed at trading posts on the floor of the exchange.
C) Immediately after the public auction of common stock, the stock begins trading in the secondary
market.
D) Trading on the NYSE is accomplished through a set of registered dealers who are connected by a
computer network.

44) Which of the statements below is TRUE?

A) Buying of shares is the selling of ownership in the company.
B) A company is said to go "private" when it opens up its ownership structure to the general public
through the sale of common stock.
C) Private companies can go public by choosing to sell stock to attract permanent financing through
equity ownership of the company.
D) Most companies have the resident expertise to complete an initial public offering (IPO), or first public
equity issue.

45) The last dividend (Div0) is $1.80, the growth rate (g) is 6%, and the required rate of return (r) is 12%.
What is the stock price according to the constant growth dividend model?
A) $31.80
B) $30.80
C) $30.00
D) $15.00

46) ________ is at the heart of corporate finance, because it is concerned with making the best choices
about project selection.
A) Capital budgeting
B) Capital structure
C) Payback period
D) Short-term budgeting

47) The ________ model is usually considered the best of the capital budgeting decision-making models.
A) internal rate of return (IRR)
B) net present value (NPV)
C) profitability index (PI)
D) discounted payback period

48) We can separate short-term and long-term decisions into three dimensions. Which of the below is
NOT one of these?
A) Degree of information gathering prior to the decision
B) Cost
C) Personality of CEO making the decisions
D) Length of impact
49) Because money is often limited, companies must be careful to choose projects that are feasible and
profitable.

50) Capital budgeting decisions are typically long-term decisions.

51) Name and describe three key observations that we can make about the capital budgeting decision.
Answer: There are three key observations we can make about the capital budgeting decision:
1) A capital budgeting decision is typically a go or no-go decision on a product, service, facility, or
activity of the firm. That is, we either accept the business proposal or we reject it. The choice of accepting
or rejecting a proposed project is the cornerstone of financial management at all levels of a business.
2) A capital budgeting decision will require sound estimates of the time and amount of appropriate cash
flow for the proposal. Thus, the appropriate future cash flow is a necessary input into all capital
budgeting decisions.
3) The capital budgeting model has predetermined accept or reject criteria. We need to examine the
validity of these criteria within each decision model.

52) The ________ model answers one basic question: How soon will I recover my initial investment?
A) payback period
B) IRR
C) NPV
D) profitability index
53) The ________ model determines at what point in time cash outflow is recovered by the corresponding
future cash inflow.
A) NPV
B) buyback
C) net present value
D) payback period

54) Consider the following four-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The
future after-tax cash inflows for years 1, 2, 3 and 4 are: $400,000, $300,000, $200,000 and $200,000,
respectively. What is the payback period without discounting cash flows?
A) 2.5 years
B) 3.0 years
C) 3.5 years
D) 4.0 years

55) Consider the following ten-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The
future after-tax cash inflows each year for years 1 through 10 are $200,000 per year. What is the payback
period without discounting cash flows?
A) 10 years
B) 5 years
C) 2.5 years
D) 0.5 years

56) The initial outlay or cost is $1,000,000 for a four-year project. The respective future cash inflows for
years 1, 2, 3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the payback period without
discounting cash flows?
A) About 2.50 years
B) About 2.67 years
C) About 3.67 years
D) About 4.50 years

57) Acme, Inc. is considering a four-year project that has an initial outlay or cost of $100,000. The
respective future cash inflows from its project for years 1, 2, 3 and 4 are: $50,000, $40,000, $30,000 and
$20,000. Will it accept the project if it's payback period is 31 months?
A) Yes, because it pays back in 25 months.
B) Yes, because it pays back in 28 months.
C) No, because it pays back in over 31 months.
D) No, because it pays back in over 35 months.
58) Which of the statements below is TRUE of the payback period method?
A) It ignores the cash flow after the initial outflow has been recovered.
B) It is biased against projects with early-term payouts.
C) It incorporates time-value-of-money principles.
D) It focuses on cash flows after the initial outflow has been recovered.

59) Which of the statements below is FALSE?

A) Firms rarely use the payback period for small-dollar decisions.
B) Many companies use the payback period for small-dollar decisions because the time spent gathering
the accurate cash flow may be lowered substantially if it is necessary to estimate only through the first
few years.
C) Many companies use the payback period for small-dollar decisions because the future cash flows on
these smaller projects may be quite difficult to accurately estimate far into the future.
D) Many companies use the payback period for small-dollar decisions because it does prevent a serious
error when the future cash flow is insufficient to recover the initial cash outlay.
60) The initial outlay or cost for a four-year project is $1,000,000. The respective cash inflows for years 1, 2,
3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the discounted payback period if the
discount rate is 10%?
A) About 2.67 years
B) About 3.35 years
C) About 3.67 years
D) About 4.50 years

61) Acme, Inc. is considering a four-year project that has initial outlay or cost of $100,000. The respective
cash inflows for years 1, 2, 3 and 4 are: $50,000, $40,000, $30,000 and $20,000. Acme uses the discounted
payback period method, and has a discount rate of 11.50%. Will Acme accept the project if it's payback
period is 37 months?
A) Yes, because it pays back in less than 37 months.
B) No, because it pays back in over 37 months.
C) No, because it pays back in over 38 months.
D) No, because it pays back in over 40 months.

62) Which of the statements below is FALSE?

A) In order to account for the time value of money with the Payback Period Model, the future cash flow
needs to be restated in current dollars.
B) The Discounted Payback Period method is the time it takes to recover the initial investment in current
dollars.
C) When we discount a future cash flow with our standard time-value-of-money concepts, we inherently
assume that the entire cash flow was received at the end of the year.
D) The Payback Period method (with no discounting) is the dollar amount that it takes to recover the
initial investment in current dollars.

63) Which of the statements below is FALSE?

A) To account for the time value of money with the Payback Period Model, the future cash flow needs to
be restated in current dollars.
B) The Discounted Payback Period method is the time it takes to recover the initial investment in future
dollars.
C) When we discount a future cash flow with our standard time-value-of-money concepts, we inherently
assume that the entire cash flow was received at the end of the year.
D) The Discounted Payback Period method does not correct for the cash flow after the recovery of the
initial outflow.
64) Consider the following four-year project. The initial outlay or cost is $180,000. The respective cash
inflows for years 1, 2, 3 and 4 are: $100,000, $80,000, $80,000 and $20,000. What is the discounted payback
period if the discount rate is 11%?
A) About 1.667 years
B) About 2.000 years
C) About 2.135 years
D) About 2.427 years

65) Dakota, Inc. is currently considering an eight-year project that has an initial outlay or cost of $140,000.
The cash inflows from its project for years 1 through 8 are the same at $35,000. Dakota has a discount rate
of 12%. Because there is a shortage of funds to finance all good projects, Dakota wants to compute the
profitability index (PI) for each project. That way Dakota can get an idea as to which project might be a
better choice. What is the PI for Dakota's current project?
A) About 1.24
B) About 1.21
C) About 1.19
D) About 1.09

66) The ________ is the cost of each financing component multiplied by that component's percent of the
total funding amount.
A) NPV
B) IRR
C) cost of capital
D) cost of debt

67) The cost of capital is ________.

A) the cost of debt in a firm that finances with both debt and equity
B) the cost of each financing component multiplied by that component's percent of the total borrowed
C) another name for the IRR
D) All of the above

68) ________ refers to the way a company finances itself through some combination of loans, bond sales,
preferred stock sales, common stock sales, and retention of earnings.
A) Capital structure
B) Cost of capital
C) Working capital management
D) NPV
68) Which of the following is not considered a part of the firm's capital structure?
A) Long-term debt
B) Retained earnings
C) Inventory
D) Preferred stock

69) A firm's capital structure can be determined by examining which parts of the firm's balance sheet?
A) The long-term assets
B) The debt and equity
C) The short-term assets and liabilities
D) None of the above because a firm's capital structure is best observed on the income statement.

70) Of the following, which is NOT a source of funds for a company?

A) Common shareholders
B) Commercial banks
C) Preferred stockholders
D) All are sources of funds for companies.

71) Which of the following would be classified as debt lenders for a firm?
A) Preferred shareholders, banks, and nonbank lenders
B) Nonbank lenders, common shareholders, and commercial banks
C) Preferred shareholders, common shareholders, and suppliers
D) Suppliers, nonbank lenders, and commercial banks

72) Which of the following would be classified as equity financing for a firm?
A) Preferred shareholders, banks, and nonbank lenders
B) Nonbank lenders, common shareholders, and commercial banks
C) Preferred shareholders, common shareholders, and retained earnings
D) Suppliers, nonbank lenders, and commercial banks

73) When a company borrows money from a bank or sells bonds, it is called ________.
A) capital structure financing
B) stock financing
C) equity financing
D) debt financing

74) Which of the items below is sometimes termed hybrid equity financing?
A) Retained earnings
B) Preferred stock
C) Callable bonds
D) Variable rate bonds

75) Which of the statements below is NOT true?

A) Preferred stock is a form of hybrid equity financing.
B) Retained earnings are a form of hybrid equity financing.
C) Common stock is a form of equity financing.
D) Corporate bonds are a form of debt financing.
76) The weighted average cost of capital is ________.
A) the average of the cost of each financing component, weighted by the proportion of each component
B) the cost of capital for the firm as a whole
C) made up of three financing components: the cost of debt, the cost of preferred stock, and the cost of
equity
D) All of the above

77) Acme Supply Co. has a new project that will require the company to borrow $3,000,000. Acme has
made an agreement with three lenders for the needed financing. First National Bank will give $1,500,000
and wants 10% interest on the loan. Lockup Bank will give $1,000,000 and wants 12% interest on the loan.
Southern National Bank will give $500,000 and wants 13% interest on the loan. What is the weighted
average cost of capital for this $3,000,000?
A) 10.55%
B) 11.17%
C) 11.66%
D) 12.16%

78) Michigan Manufacturing Inc. (MM) has a new project that will require the company to borrow
$1,000,000. MM has made an agreement with three lenders for the needed financing. First National Bank
will give $500,000 and wants 9% interest on the loan. Key West Bank will give $300,000 and wants 11%
interest on the loan. Chase Bank will give $200,000 and wants 12% interest on the loan. What is the
weighted average cost of capital for this $1,000,000?
A) 10.67%
B) 10.20%
C) 10.00%
D) 9.67%

79) Your firm has issued a 10-year $1,000.00 par value semiannual 10% coupon bond that sells for $1,000
in the market place. The proceeds from the sale of the bond issue are $975.00 per bond. What is your
firm's yield to maturity on this new bond issue? Use a financial calculator to determine your answer.
A) 5.15%
B) 10.16%
C) 10.30%
D) 10.41%

80) A/An ________ facilitates the issuing and sale of bonds and for this service is paid a fee.
A) commercial banker
B) investment banker
C) dealer
D) broker

81) An investment banker's fees are part of the ________ realized for issuing new debt or equity.
A) flotation costs
B) opportunity costs
C) revenues
D) benefits
82) Pricing preferred stock is most similar to pricing ________.
A) constant growth common stock
B) a perpetuity
C) a zero-coupon bond
D) a three-month Treasury bill

83) Your firm has preferred stock outstanding that pays a current dividend of $3.00 per year and has a
current price of $39.50. You anticipate that the economy will grow steadily at a rate of 3.00% per year for
the foreseeable future. What is the market required rate of return on your firm's preferred stock?
A) 10.82%
B) 10.59%
C) 7.59%
D) There is not enough information to answer this question.

84) Phillip Enterprises Inc. needs to determine its cost of equity capital. Use the following information to
estimate the firm's cost of equity using both the security market line and the dividend growth model. The
current market price of stock is $22.89, the risk-free rate is 4.00%, the required return on the market
portfolio is 13.50%, the firm has a constant growth rate in dividends of 3.00% per year, current dividends
are $2.00, and the firm's beta is 0.90.

85) Managing the relationship between current assets and current liabilities of the firm in order to
improve the flow of funds is called ________.
A) the business operating cycle
B) the cash conversion cycle
C) working capital management
D) the production cycle

86) The ________ is the period from the start of cash outflow for producing a product or service until the
associated cash inflow materializes from the sale of that product or service.
A) cash conversion cycle
B) accounts receivable cycle
C) current ratio
D) business operating cycle

87) The ________ starts at the time production begins and ends with the collection of cash from the sale of
the product.
A) accounts receivable cycle
B) business operating cycle
C) cash conversion cycle
D) production cycle
88) The ________ begins at the time a firm first starts to make a product and lasts until the time the
customer buys the product.
A) business operating cycle
B) accounts receivable cycle
C) cash conversion cycle
D) production cycle

89) The production cycle ________.

A) is the period from the start of cash outflow for producing a product or service until the associated cash
inflow materializes from the sale of that product or service
B) begins at the time a firm first starts to make a product and lasts until the time the customer buys the
product
C) starts when production begins and ends with the collection of cash from the sale of the product
D) starts when the customer takes delivery of the product and ends when the firm receives payment for
the product

90) Which of the following is NOT true of the cash conversion cycle?
A) It is the net period from the start of cash outflow for producing a product or service until the
associated cash inflow materializes from the sale of that product or service.
B) Cash Conversion Cycle = Production Cycle + Collection Cycle - Payment Cycle
C) Cash Conversion Cycle = Production Cycle + Collection Cycle + Payment Cycle
D) The cash conversion cycle essentially measures how quickly a company can convert its products or
services into cash.

91) Using the information provided, what is the inventory turnover for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000

A) 23.53 times
B) 53.33 times
C) 48.00 times
D) 60.00 times
92) Using the information provided, what is the length of the production cycle for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000

A) 6.08 days
B) 7.60 days
C) 53.33 days
D) 6.84 days

93) Using the information provided, what is the accounts receivable turnover for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000

A) 23.53 times
B) 29.41 times
C) 53.33 times
D) 60.00 times
94) Using the information provided, what is the collection cycle for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000

A) 6.84 days
B) 7.60 days
C) 10.34 days
D) 12.41 days

95) Using the information provided, what is the accounts payable turnover for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000

A) 15 times
B) 60 times
C) 75 times
D) 90 times
96) Using the information provided, what is the accounts payable cycle for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000

A) 4.06 days
B) 4.87 days
C) 6.08 days
D) 24.33 days

97) Jolly Roger Kite Company has a payment cycle of 17 days, a collection cycle of 31 days, and a
production cycle of 12 days. What is the average cash conversion cycle for the Jolly Roger Company?
A) 2 days
B) 36 days
C) 26 days
D) 60 days