Question 11 Which of the following is NOT commonly regarded as being a credit po

Question

Question 11

Which of the following is NOT commonly regarded as being a credit policy variable?
Answer Credit period.
Collection policy.
Credit standards.
Cash discounts.
Payments deferral period.
.2 points
Question 12

A lockbox plan is most beneficial to firms that
Answer have suppliers who operate in many different parts of the country.
have widely dispersed manufacturing facilities.
have a large marketable securities portfolio and cash to protect.
receive payments in the form of currency, such as fast food restaurants, rather than in the form of checks.
have customers who operate in many different parts of the country.
.2 points
Question 13

Which of the following statements is CORRECT?
Answer Shorter-term cash budgets, in general, are used primarily for planning purposes, while longer-term budgets are used for actual cash control.
The cash budget and the capital budget are developed separately, and although they are both important to the firm, one does not affect the other.
Since depreciation is a non-cash charge, it neither appears on nor has any effect on the cash budget.
The target cash balance should be set such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it should be changed to reflect long-term changes in the firm's operations.
The typical cash budget reflects interest paid on loans as well as income from the investment of surplus cash. These numbers, as well as other items on the cash budget, are expected values; hence, actual results might vary from the budgeted amounts.
.2 points
Question 14

Which of the following statements is most consistent with efficient inventory management? The firm has a
Answer below average inventory turnover ratio.
low incidence of production schedule disruptions.
below average total assets turnover ratio.
relatively high current ratio.
relatively low DSO.
.2 points
Question 15

Which of the following statements is CORRECT?
Answer Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that net working capital has increased.
Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing.
If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.
Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased.
If a company follows a policy of "matching maturities," this means that it matches its use of short-term debt with its use of long-term debt.
.

Explanation / Answer

Credit standards. receive payments in the form of currency, such as fast food restaurants, rather than in the form of checks. relatively low DSO. If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.

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