1. A firm has an average collection period of 13 days. The industry average ACP is 27 days. Which of the following statements is true given this information?

A. The firm could probably increase its sales by relaxing its strict accounts receivable policy.

B. The firm is maximizing its net income by minimizing its losses in accounts receivable.

C. The firm has an excellent accounts receivable policy.

D. Both statements b and c are correct.

2. Mandalay had outstanding stock options of 10 million shares at the end of fiscal year 2001 (outstanding common stock was 68 million). Mandalay had reported net income of $54 million and net income-pro forma of $43 million. This means that Mandalay:

a. The compensation expense associated with stock options increased earnings and had almost no effect on stock dilution potential

b. The compensation expense associated with stock options reduced earnings by over 20% & potential dilution was almost 15%

c. The company is obviously near bankruptcy

d. The compensation expense associated with stock options reduced earnings by almost 50%, but potential dilution was negligible