Question 1

Luke company has an inventory conversion period of 60 days, a receivables conversion period of 45 days, and a
payments cycle of 30 days. What is the length of the firm’s cash conversion cycle?

90 days
 a
54 days
 b
75 days
 c
105 days
 d
Question 2

Julia Company has P5 million of average inventory and sales of P30 million. Using a 365-day year, calculate the firm’s
inventory conversions period

45.00 days
 a
30.25 days Question 3
 b
72.44 days What is economic order quantity for the following inventory policy: A firm sells 32,000
 c bags of premium sugar per year. The cost per order is P200 and the firm experiences a
carrying cost of P0.80 per bag
60.83 days
 d
2000 bags
 a
4000 bags
 b
16000 bags
 c
8000 bags
 d
Question 4

If a firm is given a trade credit terms of 2/10, net 30, then cost to the firm failing to take the discount is:

36.7%
 a
2%
 b
30%
 c
10%
 d
Question 5

The cost of discounts missed on credit terms of 2/10, n/60 is

2%
 a
 12.4%
 b
14.9%
 c
21.2%
 d
Question 6

An invoice of P100,000 purchase has credit terms of 1/10, n/40. A bank loan for 8 percent can be arranged at any
time. When should the customer pay the invoice?

Pay on the 40th

 a
Pay on the 1st
 b
Pay on the 60th
 c
Pay on the 10th
 d
Question 7

You plan to borrow P10,000 from your bank, which offers to lend you the money at a 10 percent nominal, or stated,
rate on a one-year loan. What is the effective interest rate if the loan is a discount loan?

12.45%
 a
10.00%
 b
14.56%
 c
11.11%
 d
Question 8

Perlas Company borrowed from a bank an amount of P1,000,000. The bank charged a 12% stated rate in an add-on
arrangement, payable is 12 equal monthly installments.

22.15%
 a
12.70%
 b
25.05%
 c
24.00%
 d
Question 9

What is the effective rate of a 15% discounted loan for 90 days, P200,000 with 10% compensating balance? Assume
360 days per year.
 15%
 a
22.2%
 b
20%
 c
17.4%
 d
Question 10

What is the effective rate if the company borrows P200,000 on a 6 percent discounted loan with a 10 percent
compensating balance for 3 months?

6.78%
 a
6.00%
 b
7.14%
 c
6.44%
 d
Question 11

If the firm borrows P185,000 at 8 percent on a one-year discounted loan, what is the effective interest rate?

8.70%
 a
9.07%
 b
8%
 c
7.41%
 d
Question 12

Mahogany Company has a total annual cash requirement of P6,075,000 which are to be paid uniformly. Mahogany
has the opportunity to invest the money at 8 percent per annum. The company spends, on the average, P45 for
every cash conversion to cash and vice versa. What is the optimal conversion size for cash?

41,335
 a
60,000
 b
58,457
 c
82,670
 d
Question 13

Juno Industrial Supply has P250,000 line of credit at a 9 percent interest rate. The loan agreement requires a 3
percent compensating balance, which is based on the total amount borrowed, and which will be held in an interest-
free account. What is the effective interest rate if the firm borrows P160,000 on the line of credit for one year?
 8.67%
 a
9.03%
 b
8.78%
 c
9.28%
 d
Question 14

Echo borrowed P100,000 from a bank a one-year 8% term loan, with interest compounded quarterly. What is the
effective annual interest on the loan?

9.12%
 a
8.24%
 b
8%
 c
10.41%
 d
Question 15

For raw materials L12, a company maintains a safety of 5,000 pounds. Its average inventory (taking into account the
safety stock) is 12,000 pounds. What is the apparent order quantity?

6,000 lbs
 a
14,000 lbs
 b
18,000 lbs
 c
24,000 lbs
 d