1. If a company experiences a quicker inventory turnover rate and a quicker collection experience for its accounts receivable, it can expect:
a. No change in the time period in which it realizes its cash because the accounts receivable collections offset the inventory movement.
b. A quicker realization of cash because stock spends less time on the shelf and collections are more effective.
c. A longer realization of cash because stock spends less time on the shelf and collections are less effective.
d. A longer realization of cash because stock spends more time on the shelf and collections are less effective.
2. The accounts receivable and inventory turnover rates remain the same. However a company negotiates with its major supplier of inventory to allow an extra 15 days in which to pay with no finance charge and with no loss of price discount.
a. The company will realize a more efficient cash conversion.
b. The company will experience no change in an efficient cash conversion.
c. The company will have to wait an extra 15 days to collect on its accounts receivable.
d. The company will have to wait more than 15 days to collect on its accounts receivable.
3. A company's accounts receivable turnover rate (its rate, not days) decreases. The company can expect to receive cash for its credit sales earlier than expected.
True
False
4. A company's accounts receivable turnover rate (its rate, not days) increases. The company can expect to receive cash for its credit sales earlier than expected.
True
False
5. A company's inventory turnover, as measured in days, decreases. This means the rate in which the company moves the inventory items it has in stock is becoming more rapid.
True
False
6. A company's inventory turnover, as measured in days, increases. This means the rate in which the company moves the inventory items it has in stock is becoming more rapid.
True
False
7. A quick ratio measures the ability of a firm to satisfy its short-term liabilities overnight.
True
False
9. Common stock is a short-term method of holding cash until it is needed.
True
False
10. A certificate of deposit of 6 months is a short-term method of holding cash until it is needed.
True
False
11. US treasury bills are a short-term method of holding cash until it is needed.
True
False
12. Preferred stock is a short-term method of holding cash until it is needed.
True
False
13. US treasury notes of 10 year duration are a short-term method of holding cash until it is needed.
True
False
14. A corporate bond is a short-term method of holding cash until it is needed.
True
False
15. Commercial paper is a short-term method of holding cash until it is needed.
True
False
16. Money market funds are a short-term method of holding cash until it is needed.
True
False
17. Municipal bonds are a short-term method of holding cash until it is needed.
True
False
18. Interest bearing demand deposit accounts (DDA) are a short-term method of holding cash until it is needed.
True
False
19. Corporate debentures are a short-term method of holding cash until it is needed.
True
False