Ar Inventory
Take-Home Exam – Marketable Securities & AR/Inventory Management
Name: _________________________ Score:____________
I. Selection
__________1. A company which foregoes the discount when credit terms are 4/15 net 70 is essentially borrowing money from his supplier for an additional: (A) 40 days (B) 55 days (C) 70 days (D) 85 days.
__________2. A company that foregoes a discount of 1/7 net 30 is essentially borrowing money from the vendor at: (A) 1% (B) 12.29% (C) 16% (D) 52.7%.
__________3. What factors should we consider when selecting a source of short-term credit? (A) Effective cost and availability (B) Liquidity and profitability (C) Historical trend analysis and liquidity (D) None of the above
__________4. Once a cash discount period has passed: (A) one should pay immediately (B) there is no financial incentive to pay before the final due date (C) one should pay after the final due date (D) cannot be determined from the information.
__________5. The annual cost of not taking advantage of the 3/10, net 30 terms offered by a supplier is (hint: use $1.00 as the invoice amount and a 360-day year): (A) 56% (B) 45% (C) 32% (D) 28%.
__________6. Which of the following would NOT be considered an unsecured loan? (A) Accrued tax payments (B) Line of credit (C) Transaction loans (D) Factored accounts receivable
__________7. The primary advantage that factoring accounts receivable provides is: (A) the flexibility it gives to the borrower (B) that the financial institution bears the risk of collection (C) the low cost as compared with other sources of short-term financing (D) that the financial institution services the accounts.
__________8. The cost of trade credit varies with the: (A) size of the cash discount (B) length of time between the end of the discount period and the final due date (C) length of time between the end of the discount period and when the firm purchased from the supplier (D) both A and C.
__________9. Which of the following is an
Name: _________________________ Score:____________
I. Selection
__________1. A company which foregoes the discount when credit terms are 4/15 net 70 is essentially borrowing money from his supplier for an additional: (A) 40 days (B) 55 days (C) 70 days (D) 85 days.
__________2. A company that foregoes a discount of 1/7 net 30 is essentially borrowing money from the vendor at: (A) 1% (B) 12.29% (C) 16% (D) 52.7%.
__________3. What factors should we consider when selecting a source of short-term credit? (A) Effective cost and availability (B) Liquidity and profitability (C) Historical trend analysis and liquidity (D) None of the above
__________4. Once a cash discount period has passed: (A) one should pay immediately (B) there is no financial incentive to pay before the final due date (C) one should pay after the final due date (D) cannot be determined from the information.
__________5. The annual cost of not taking advantage of the 3/10, net 30 terms offered by a supplier is (hint: use $1.00 as the invoice amount and a 360-day year): (A) 56% (B) 45% (C) 32% (D) 28%.
__________6. Which of the following would NOT be considered an unsecured loan? (A) Accrued tax payments (B) Line of credit (C) Transaction loans (D) Factored accounts receivable
__________7. The primary advantage that factoring accounts receivable provides is: (A) the flexibility it gives to the borrower (B) that the financial institution bears the risk of collection (C) the low cost as compared with other sources of short-term financing (D) that the financial institution services the accounts.
__________8. The cost of trade credit varies with the: (A) size of the cash discount (B) length of time between the end of the discount period and the final due date (C) length of time between the end of the discount period and when the firm purchased from the supplier (D) both A and C.
__________9. Which of the following is an