I have been working on these problems for several weeks now. Any help and suggested solutions would be very helpful. Thank you!!
1. All of the following factors may lengthen a company’s cash cycle EXCEPT:
A. An increase in fixed asset spending to support long-term sales growth
B. An increase in inventory to stock an additional warehouse
C. A decrease in accounts payable because suppliers tightened payment terms……..
D. An increase in receivables after extending longer credit terms to customers
2. A company’s cash cycle is measured by which of the following?
A. Accounts receivable turnover + inventory turnover
B. Days’ sales outstanding in A/R + Days’ purchases outstanding in A/P
C. Accounts receivable turnover – Inventory turnover + accounts payable turnover
D. Days’ sales outstanding in A/R + Days’ cost of goods sold in inventory - Days’ purchases outstanding in A/P……..
3. All of the following will typically occur in a company’s cash or asset conversion cycle EXCEPT:
A. Fixed assets to support the production of inventory are purchased
B. Cash is invested in the production of inventory
C. Trade credit reduces cash required to support inventory…..
D. Inventory is converted into receivables as sales occur
4. Cash cycle analysis can help identify which of the following reasons a company has improved its loan repayment ability?
I. A reduction of days’ sales outstanding in accounts receivable after a company improved its collection procedures
II. Consistent growth in sales
III. A reduction of receivables and inventory at the company’s seasonal low point
IV. A company’s ability to negotiate extended terms with suppliers
A. I & III
B. II & IV
C. I, III & IV
D. I, II, III & IV………
5. Which of the following determine the length of a company’s operating cycle?
I. Time it takes to produce and sell inventory
II. Time it takes to pay trade creditors
III. Time it takes to pay employees
IV. Time it takes to bill and collect receivables
A. I & II
B. I, II & IV……..
C. II, III & IV
D. I, II, III & IV
6. Which of the following businesses would typically have the shortest cash cycle?
A. A fast food restaurant
B. A clothing boutique
C. An office supplies wholesaler
D. A commercial printing service
7. If a company has days’ sales outstanding in accounts receivables of 45, days’ COGS in inventory of 123 and days’ COGS in accounts payable of 36, what is the length of the cash conversion cycle?
A. 87 days
B. 132 days
C. 168 days
D. 204 days
1. Return on assets is an important measure of financial productivity because it considers which of the following factors?
I. The impact on profits of a change of ownership
II. The impact on profits if assets grow faster than sales
III. The impact on profits of added production capacity
IV. The impact on profits if asset turnovers are managed less efficiently
A. I & III
B. II & IV
C. I, II & III
D. II, III & IV
2. A company with a high working capital turnover ratio may exhibit which of the following characteristics?
A. A very generous cushion of liquidity.
B. Inventory maintained at levels needed to support unexpected sales
C. High level of receivables from slow-paying customers
D. Lower reliance on long-term funding to support current assets
3. How is the working capital turnover ratio calculated?
A. (Current assets – current liabilities)/ net sales
B. (A/R days + inventory days)/ A/P days
C. A/R days + inventory days – A/P days)/ net sales
D. Net sales/ (current asset – current liabilities)
4. Which of the following reasons might explain why a company has days’ sales outstanding in accounts receivable that are higher than those of its competitors?
I. Its terms of sale are more liberal than those of competitors
II. Its customer base is made up of customers that pay more quickly those of competitors
III. It takes longer to send invoices to its customers than its competitors
IV. It is more successful at collecting accounts that would otherwise become delinquent than its competitors
A. I only
B. II only
C. I & III
D. II & IV
5. A low net sales to total assets ratio may indicate all of the following EXCEPT:
A. A company has recently made additional investments in assets
B. A company operates in an industry with relatively low fixed asset requirements
C. A company is depreciating its fixed assets more slowly than the average for its industry
D. A company owns more of its fixed assets than is typical for the industry
6. A company can improve its return on equity while also contributing to its repayment ability by which of the following actions?
I. Increasing its net profit margin on sales
II. Increasing sales while assets remain stable
III. Increasing net worth as a percent of total assets
IV. Increasing trade payables and accrued expenses as a percent of total assets
A. I & II
B. I & IV
C. II & III
D. II, III & IV
7. Companies measure financial productivity using which of the following ratios?
I. Return on equity
II. Break-even point
III. Degree of operating leverage
IV. Return on average assets-
A. I & IV
B. II & III
C. II, III & IV
D. I, II, III & IV
8. When comparing one company’s return on equity to its industry peers, the RMA Annual Statement Studies uses which of the following measures?
A. Net Income/Average Net Worth
B. Net Income/Tangible Net Worth
C. Profit Before Taxes/Tangible Net Worth
D. Profit Before Taxes/Average Tangible Net Worth
1. All of the following factors may lengthen a company’s cash cycle EXCEPT:
A. An increase in fixed asset spending to support long-term sales growth
B. An increase in inventory to stock an additional warehouse
C. A decrease in accounts payable because suppliers tightened payment terms……..
D. An increase in receivables after extending longer credit terms to customers
2. A company’s cash cycle is measured by which of the following?
A. Accounts receivable turnover + inventory turnover
B. Days’ sales outstanding in A/R + Days’ purchases outstanding in A/P
C. Accounts receivable turnover – Inventory turnover + accounts payable turnover
D. Days’ sales outstanding in A/R + Days’ cost of goods sold in inventory - Days’ purchases outstanding in A/P……..
3. All of the following will typically occur in a company’s cash or asset conversion cycle EXCEPT:
A. Fixed assets to support the production of inventory are purchased
B. Cash is invested in the production of inventory
C. Trade credit reduces cash required to support inventory…..
D. Inventory is converted into receivables as sales occur
4. Cash cycle analysis can help identify which of the following reasons a company has improved its loan repayment ability?
I. A reduction of days’ sales outstanding in accounts receivable after a company improved its collection procedures
II. Consistent growth in sales
III. A reduction of receivables and inventory at the company’s seasonal low point
IV. A company’s ability to negotiate extended terms with suppliers
A. I & III
B. II & IV
C. I, III & IV
D. I, II, III & IV………
5. Which of the following determine the length of a company’s operating cycle?
I. Time it takes to produce and sell inventory
II. Time it takes to pay trade creditors
III. Time it takes to pay employees
IV. Time it takes to bill and collect receivables
A. I & II
B. I, II & IV……..
C. II, III & IV
D. I, II, III & IV
6. Which of the following businesses would typically have the shortest cash cycle?
A. A fast food restaurant
B. A clothing boutique
C. An office supplies wholesaler
D. A commercial printing service
7. If a company has days’ sales outstanding in accounts receivables of 45, days’ COGS in inventory of 123 and days’ COGS in accounts payable of 36, what is the length of the cash conversion cycle?
A. 87 days
B. 132 days
C. 168 days
D. 204 days
1. Return on assets is an important measure of financial productivity because it considers which of the following factors?
I. The impact on profits of a change of ownership
II. The impact on profits if assets grow faster than sales
III. The impact on profits of added production capacity
IV. The impact on profits if asset turnovers are managed less efficiently
A. I & III
B. II & IV
C. I, II & III
D. II, III & IV
2. A company with a high working capital turnover ratio may exhibit which of the following characteristics?
A. A very generous cushion of liquidity.
B. Inventory maintained at levels needed to support unexpected sales
C. High level of receivables from slow-paying customers
D. Lower reliance on long-term funding to support current assets
3. How is the working capital turnover ratio calculated?
A. (Current assets – current liabilities)/ net sales
B. (A/R days + inventory days)/ A/P days
C. A/R days + inventory days – A/P days)/ net sales
D. Net sales/ (current asset – current liabilities)
4. Which of the following reasons might explain why a company has days’ sales outstanding in accounts receivable that are higher than those of its competitors?
I. Its terms of sale are more liberal than those of competitors
II. Its customer base is made up of customers that pay more quickly those of competitors
III. It takes longer to send invoices to its customers than its competitors
IV. It is more successful at collecting accounts that would otherwise become delinquent than its competitors
A. I only
B. II only
C. I & III
D. II & IV
5. A low net sales to total assets ratio may indicate all of the following EXCEPT:
A. A company has recently made additional investments in assets
B. A company operates in an industry with relatively low fixed asset requirements
C. A company is depreciating its fixed assets more slowly than the average for its industry
D. A company owns more of its fixed assets than is typical for the industry
6. A company can improve its return on equity while also contributing to its repayment ability by which of the following actions?
I. Increasing its net profit margin on sales
II. Increasing sales while assets remain stable
III. Increasing net worth as a percent of total assets
IV. Increasing trade payables and accrued expenses as a percent of total assets
A. I & II
B. I & IV
C. II & III
D. II, III & IV
7. Companies measure financial productivity using which of the following ratios?
I. Return on equity
II. Break-even point
III. Degree of operating leverage
IV. Return on average assets-
A. I & IV
B. II & III
C. II, III & IV
D. I, II, III & IV
8. When comparing one company’s return on equity to its industry peers, the RMA Annual Statement Studies uses which of the following measures?
A. Net Income/Average Net Worth
B. Net Income/Tangible Net Worth
C. Profit Before Taxes/Tangible Net Worth
D. Profit Before Taxes/Average Tangible Net Worth