the following are desirable in cash management except

december 28, 2020

D21. According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from a "financing" activity? The basic principle of segregation of duties also applies in controlling cash disbursements. An average of 5 days is required for mailed checks to be received, 4 days for CMR to process them and 1� days for the checks to clear through its bank. Under a relaxed policy, current assets will be 25 percent of sales. 17. D28. The bank. 31. Phranklin Pharms Inc. purchases merchandise from a company that gives sales terms of 2/15, net 40. 43.6% c. 106.9% d. 73.4% 41. b. there is a decrease in the distribution level of your product, and a more aggressive stance in necessary to retain market share. Then, the firm collects cash from the sale 1 month later on November 30. bank reconciliations. 10. Jarrett Enterprises is considering whether to pursue a restricted or relaxed current asset investment policy. 39. Snobiz, Inc. has $2 million invested in Treasury bills yielding 8% per annum; this investment will satisfy the firm's need for funds during the coming year. It is calculated from the following: Current ratio = current assets / current liabilities. If Snobiz, Inc. needs $167,000 a month, how frequently should the CFO sell off Treasury bills? Increased payables and increased bank loan. Enert, Inc.'s current capital structure is shown below. 795 B. b. Policy A would increase sales by $500,000, but bad debt losses on additional sales would be 8%. The firm�s annual sales are $400,000; its fixed assets are $100,000; debt and equity are each 50 percent of total assets. B) Keeping only necessary levels of assets. effective cash management and control includes all of the following except purchase of stocks and bonds cash collected & recorded by a company but not yet … d. Short-term investments of excess cash 34. Planning expenditures Keeping only necessary assets. c) A car dealership holds cash to pay its utility bill. 6. Transactions balance. Ten Q�s Inc. has an inventory conversion period of 60 days, a receivable conversion period of 35 days, and a payment cycle of 26 days. $87,111.20 b. Increase bad-debt losses. d. $800,000. d. $(12,000). The Sales Director of Can Can Co. suggests that certain credit terms be modified. $6,000. $100,000 C. $250,000 D. $500,000 20. $400,000. It converts the raw materials into inventory by September 30. May 1 The petty cash fund balance is increased to $ 400. The credit terms for these purchases are 2/10, net 30, and payment is made on the 30th day after each delivery. Costs of products and related expenses amount to 40% exclusive of the cost of carrying receivables of 15% and bad debts expenses. $37,500 C. $125,000 D. $22,500 Questions 19 and 20 are based on the following information. cash outflow to acquire fixed assets. Determine the adjusted balance on the basis of the following reconciling items: (a) Deposits of cash sales of $1,368 had been erroneously recorded in the cash receipts journal as $1,296. c. Increase by P65,000. c. $12,000. Cash management accounts allow you to access your money and pay bills, as well as manage your savings and earn interest. If money market rates average 4% during the year, the additional annual income (loss) from using the lock box service would be a. d. Offsetting the profitability of current assets and current liabilities against the probability of technical insolvency. Which of the following investments is not likely to be a proper investment for temporary idle cash? Debt 25% Preferred equity 5% Common equity 70% Enert's management is planning to build a $75 million facility that will be financed according to this desired capital structure. C9. 12. M Assuming a 360-day year, what amount of cash (rounded to the nearest dollar) will the firm receive from the finance company at the time a $100,000 account that is due in 90 days is turned over to the finance company? For individuals, cash is also essential for financial stability while also usually considered as part of a total wealth portfolio. You point out that the nominal cost of not taking the discount and paying on Day 30 is around 37 percent. B30. Its average collection period is 40 days and bad debts are 5% of sales. 20. $2,091.65 B. A. b. D28. Effective cash management and control includes all of the following except: a. 19. Regardless, there are several key metrics that are monitored and analyzed by cash management executives on a daily, monthly, quarterly, and annual basis. A. d. Higher total asset turnover. Numero 1 Co.�s budgeted sales for the coming year are P96 million, of which 80% are expected to be credit sales at terms of n/30. $100 profit. (Assume 360 days a year.) Yes, because losses will be reduced by P78,800. Bank reconciliations. D19. 133 days. Companies operating with invoice billing can reduce the days payable or offer discounts for quick payments. D39. D. 153 days. c. Deterioration of aging and increase in the level of receivables. If net change in working capital is positive a company has increased its current assets available to cover current liabilities which increases total cash on the bottom line. A. D. Earn maximum returns on investment assets. cash inflow from dividend income. B41. 26. a. P60,000 b. P80,000 c. P70,000 d. Zero 23. She also discovered that 22% of the slow payers and 5% of the prompt ones subsequently defaulted. Which of the following would be considered a application of funds? Chapter 01 - Finance and the Financial Manager 28. c. No, because income will be reduced by P13,000. A. 81 days and $120,000. he� CJ he� B*CJ aJ ph he� 5�B*CJ \�aJ ph he� CJ OJ QJ ? Hold substantial amount of fixed assets. Working capital, also known as net working capital (NWC), is a measure of a company's liquidity, operational efficiency and short-term financial health. Most sales are on cash basis and receivables are aged �current� c. Post-dated checks are not deposited on time upon maturity. Bobo LLC's has an asset base of $1 million. All of the following are valid reasons for a business to hold cash and marketable securities except to A. balancing monetary assets and liabilities. There are also many different cash management solutions for individuals and businesses seeking to obtain the best return on cash assets or the most efficient use of cash comprehensively. For individuals, maintaining cash balances while also earning a return on idle cash are usually top concerns. a. 44. Banks are typically a primary financial service provider for the custody of cash assets. If it pursues this opportunity, the after tax profit will a. ABC Company finances all of its seasonal inventory needs from the local bank at an effective interest cost of 9%. Out of convenience, your firm is not taking discounts, but is paying after 20 days, instead of waiting until Day 30. D8. The manufacturing and selling costs are 70% of sales and corporate tax is 35%. � C8. Below is the summary of changes: OldNewAverage number of days collection7550Ratio of credit sales to total sales70%60%Projected sales for the coming year is P100 million and it is estimated that the new policy will result in a 5% loss if the new policy is implemented. D38. The net proceeds would be further reduced by an annual interest charge of 10% on the monies advanced. D. Maximize profits. If a net change in working capital is negative, a company has increased its current liabilities which reduces its ability to pay them as efficiently. A strong cash culture starts at the top. A11. A. D15. Assuming a tax rate of 35% and 360 days a year, the incremental change in the profitability of the company if stricter policy would be implemented would be a. = � � � � � n � � � � � : ; X � � � � C � � � ; � � � � j k � � � U" V" ��Ĺ��Ĺ��ՠ��Ĺ��ՠՠ�� he� CJ OJ QJ mH sH he� >*CJ OJ QJ he� >*CJ mH sH he� CJ mH sH he� >*CJ Initial public offering of an established profitable conglomerate. b. If this sequence accurately represents the average working capital cycle, what is the firm's cash conversion cycle in days? To enable a company to meet the cash demands from the normal flow of business activity. 3. Advanced technology for payables management can also be helpful. b. B. A company has accounts payable of $5 million with terms of 2% discount within 15 days, net 30 days (2/15 net 30). C9. The operating cycle will increase with all of the following changes except _____. Wildthing Amusement Company�s total assets fluctuate between $320,000 and $410,000, while its fixed assets remain constant at $260,000. If its year-end receivables turnover is 4.5, what is the average collection period and the year-end receivables, respectively (assume a 365-day year)? $350 C. $400 D. $40,000 9. 18. The minimum risk group to which credit should be extended. b. Question 4 Since a large percentage of multinational fund transfers are subsidiary-to-subsidiary, the payoff from _____ can be large. Every 15 days a company receives $10,000 worth of raw materials from its suppliers. c. The projected margin from increased sales will exceed the cost of carrying the incremental receivables. c) tax rate changes. C3. D16. To enable a company to avail itself of a special inventory purchase before prices rise to higher levels. During the month, because of the campaign to achieve volume targets, the general manager has waived the credit block policy in a number of instances involving big volume accounts. Many companies may outsource part or all of their cash management responsibilities to different service providers. A. C11. Jumpdisk Company writes checks averaging $15,000 a day, and it takes five days for these checks to clear. On cash discounts, all of the following statements do not apply except a. For businesses, the cash flow statement is a central component of cash flow management. A. The following are advantages of separation of ownership and management of corporations except: A) Corporations can exist forever. 37. The adoption of the new credit terms would result in expected discount availed of in the coming year of a. P600,000 b. P288,000 c. P480,000 d. P192,000 28. d. Treasury bonds due within one year. $(6,000). Determining the appropriate level of working capital for a firm requires a. The cash management function is concerned with all of the following EXCEPT: a. Its credit period and average collection period are both 30 days and 1% of its sales end as bad debts. 23. Total transactions costs associated with obtainingHigherC. C14. The operating portion of cash activities will vary based heavily on net working capital which is reported on the cash flow statement as a companyâs current assets minus current liabilities. C17. a. 35. The firm also receives checks in the amount of $17,000 per day, but the firm loses three days while its receipts are being deposited and cleared. A multinational can centralize cash management and attempt to reduce exchange rate risk exposure through the use of. Company policy for internal control should include all of the following except: a) Employees will be rotated. 15) Which of the following scenarios is an example of the precautionary motive to hold cash? What are the expected annual savings from a lockbox system that collects 200 checks per day averaging $500 each, and reduces mailing and processing times by 2.0 and 0.5 days, respectively, if the annual interest rate is 6%? Wasting Resource Co. has annual credit sales of P4 million. a reinvoicing center. Cash surplus investment d. Obtaining financing services 9. c. 2/10, n/90. A precautionary motive for holding excess cash is a. Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances. Credit limits are expanded, credit sales increase, and credit terms remain the same. 56.25%. An increase in sales resulting from an increased cash discount for prompt payment would be expected to cause A. c. Decreased receivables. The average collection period will remain at 60 days (6 turns per year) no matter the decision made. A18. a. P652.10 b. P6,521.00 c. P6.52 d. P2,380 17. If it costs $50 to sell these bills, regardless of the amount, how much should be withdrawn at a time? What should the firm do? A company has daily cash receipts of $150,000. He instituted new policies and with respect to credit policy, below is a summary of relevant information: Old Credit PolicyNew Credit PolicySalesP1,800,000P1,980,000Average collection period30 days36 daysThe company requires a rate of return of 10% and a variable cost ratio of 60%. An increase in the operating cycle. A. 201 C. 135 D. 66 36. A. c. P701,573 d. P9,750. 15 days. The cash flow statement comprehensively records all of a businessâs cash flows. b) All cash receipts will be deposited into the bank the same day they arrive. The credit and collection manager is considering instituting a stricter collection policy, whereby bad debts would be reduced to 2% of total sales, and the average collection period would fall to 30 days. Ignoring cost and other effects on the firm, which of the following measures would tend to reduce the cash conversion cycle? External stakeholders find these ratios important for a variety of analysis purposes as well. 19. (Assume a 360-day year.) a. It has stable, predictable cash flows, and the estimated total amount of net new cash needed for transactions for the year is $175,000. 2. b) a decrease in cash. Minimize bad debt losses. If its sales for the period just ended amounted to P972,000, what is the investment in accounts receivable? Your advise will be favorable if a. Maximizing rate of return. d. Cash sales increase, current receivables ratio to past due increases, credit limits remain the same. Minimizing taxes. D. All policies lead to the same total firm profit, thus all policies are equal. c. Take discounts when offered. Liquidity ratios are a class of financial metrics used to determine a debtor's ability to pay off current debt obligations without raising external capital. How much is the maximum level of new short-term loans it can secure without violating the policy? Given revenues from sales of $1,200 and the cost of sales of $1,100, what would the average level of revenues that makes it worthwhile to extend credit to slow payers? It can borrow funds from a bank at an annual rate of 12%, or it can wait until the 30th day when it will receive revenues to cover the payment. D5. c. Gross profit has declined. d. Fluctuating current assets with short-term debt. d) All of these answers are correct. c. Maintaining short-term debt at the lowest possible level because it is ordinarily more expensive than long term debt. cash outflow to the government for taxes. 2/10, n/100. The write-off of an uncollectible account (assume the use of the allowance for doubtful accounts method). c. An increase in cash sales in proportion to credit sales. 21. If the firm follows a maturity matching or moderate working capital financing policy, what is the likely level of its long-term financing? Furthermore, the variable cost ratio is 60%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are $45,000,000, and the required rate of return is 6%. = � � � � { � � � � � � � � � � � � � � � � $��^��`��a$ $�h��^�h`��a$ $d� a$ $ � 3� ��^��`��a$ �h^�h $��d� ^��`��a$ $ � h��h��d� ^�h`��a$ $7$ 8$ H$ a$ $��7$ 8$ H$ ^��`��a$ � � � 8 n � � ? The level of accounts receivable will most likely increase as a. The company changed from using checks to sight drafts which will permit it to hold unto its cash for one extra day. b. d. Use of checks and drafts in disbursing funds. A. 8. Keeping only necessary levels of assets. The general manager intends to extend the credit period to 45 days which will increase sales by P300,000. $1,176 C. $4,800 D. $1,224 Answer Sheet Theory Problems 1. ... All of the following are true of the number of days' sales uncollected ratio except: Is most effective in evaluating the cash sales of a company. 24. The quick ratio is calculated from the following: Quick ratio = (cash equivalents + marketable securities + accounts receivable) / current liabilities. C45. Maintain the level of receivables as sales decrease. With a restricted policy, current assets will be 15 percent of sales. a. 2. A. Minimize the use of float. Mr. S. Mart assumed the presidency of Riches Corp. 4% C. 5% D. 9% 3. c. The total demand for cash is known with certainty. Assume 250 processing days per year. The effective annualized percentage cost of the financing, based on a 360-day year, will be A. Suppose the credit terms offered to your firm by your suppliers are 2/10, net 30 days. B37. C30. Purchase of stocks and bonds b. d. Cash flow requirements are random. a. b) salvage value. They may also choose to use technologies that facilitate faster and easier payments such as automated billing and electronic payments. The offers that appear in this table are from partnerships from which Investopedia receives compensation. B. Fixed expenses amount to P150,000. Reduces the need for compensating balances. $164 loss. B. (b) Deposits in transit not recorded by bank, $2,000. � D. 2.00%. 7. B35. The amount of cash that a firm keeps on hand in order to take advantage of any bargain purchases that may arise is referred to as its A. What is the firm�s net float in dollars? Management is trying to decide between not taking discounts from one of their three biggest suppliers, or a 14.75% per annum renewable discount loan from its bank for 3 months. About every 3 days. D20. If you calculate that this policy effectively costs your firm $157,500 each year, what is the firm�s average accounts payable balance? (Assume a 360-day year.) b. d. Forgo discounts that are currently being taken. d. Minimize the amount of funds held in very liquid assets. Cash management is the process of managing cash inflows and outflows. While it is often transparently reported to stakeholders on a quarterly basis, parts of it are usually maintained and tracked internally on a daily basis. Calculate the total number of expected defaults, assuming no repeat business is on the horizon. Changing the capital structure and dividend policy for the firm. It is the policy of Franz Corp. that the current ratio cannot fall below 1.5 to 1.0. $93,000 B. B20. b. What is the maximum amount of costly trade credit Phranklin could get, assuming they abide by the suppliers credit terms? The credit and collection policy of Amargo Co. provides for the imposition of credit block when the credit line is exceeded and/or the account is past due. Increase by P35,000. Decrease of P13 million. 5. A. Net profit has increased. D. Accelerates the inflow of funds. b. $4,183.30 C. $8,750.00 D. $17,500.00 12. Cash monitoring is needed by both individuals and businesses for financial stability. B. It is held that the level of accounts receivable that the firm has or holds reflects both the volume of a firm�s sales on account and a firm�s credit policies. In corporate cash management, also often known as treasury management, business managers, corporate treasurers, and chief financial officers are typically the main individuals responsible for overall cash management strategies, cash related responsibilities, and stability analysis. A proposed lockbox system would reduce the mail and process time to 3 days and the check clearing time to 1 day. adjusted cash balance per the bank records. D17. b. WIP inventory usually has the highest loan value of the different inventory types. The following are desirable in cash management except: a. (p. 9) The following are advantages of separation of ownership and management of corporations except: a. D. 56.00%. If the effective annual interest rate on this loan is 12%, what will be the net dollar savings over the year by borrowing and then taking the discount on the materials? B. Bank balance $ 30,361 + Deposit in transit 3,850 c. Higher ratio of current assets to fixed assets. A company has a 10% cost of borrowing and incurs fixed costs of $500 for obtaining a loan. Which of the following procedures would the auditor perform in testing the completeness assertion for accounts payable? a. However, sales would also fall by an estimated P500,000 annually. 27. Increased receivables. short-term investments of excess cash. A. Zero as the positive and negative effects offset each other. Questions 10 and 11 are based on the following information. Greater risk of needing to sell current assets to repay debt. 21. Cash is the primary asset individuals and companies use to pay their obligations on a regular basis. foreign-currency swaps. Which of the following actions would not be consistent with good management? U `��"�� R �W 8 �p 6 �q � �v 0 w �p � %{ �\ � %{ l �q %{ � �q �] V V V �v �v c] X V V V w V V V V � � � DG �R � � � �R � � � � � � � � � �� CPA REVIEW SCHOOL OF THE PHILIPPINES Manila MANAGEMENT ADVISORY SERVICES WORKING CAPITAL FINANCE THEORY 1. c. Decrease of P5 million. D. About every 18 days. C. Meet future needs. d. Decrease in collections during the month the move was done. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be A. Using a 360-day year, the pre-tax cost of carrying the additional investment in receivables under the new policy would be a. P4,800 b. P2,880 c. P3,000 d. P4,080 29. d. The cost of not taking the discount is higher for terms of 2/10, net 60 than for 2/10, net 30. a. $250,000. The Liberal Sales Co. budgeted sales for the coming year are P30 million of which 80% are expected to be on credit. A reduction in net income by P70,000. d. WIP represents a lower investment by a corporation as opposed to other types of inventories. cash on hand. In assessing the loan value of inventory, a banker will normally be concerned about the portion of inventory that is work-in-process because a. WIP inventory is relatively easy to sell because it does not represent a raw material or a finished product. b. b. The bottom line of the cash flow statement reports how much cash a company has readily available. $3,624 B. c. Treasury bills. The one item listed below that would warrant the least amount of consideration in credit and collection policy decisions is the A. All of the following influence capital budgeting cash flows EXCEPT: a) accelerated depreciation. 40. $3,273 B. 2/10, n/60. When the average cash balance of the company is higher, the the cash balance is . The treasurer of the company has investigated a lock box service whereby the bank that offers this service will reduce the company�s collection time by four days at a monthly fee of $2,500. B. Increase by P97,500. C36. If QRS can use the extra cash to earn 14% annually, what annual peso return will it earn? All of the following are considered effective cash management principles except Multiple Choice Retaining excess cash for unexpected expenditures. $40,000 c. $50,000 d. $60,000 26. In conjunction with internal controls, companies also regularly monitor and analyze liquidity and solvency ratios within cash management. Hakuna Inc. sells on terms of 3/10, net 30 days. C) Hire professional managers D) Incur agency costs Answer: D Type: Medium Page: 7 23. B. Manage Accounts Receivable B. $50,000 B. 29. The cash flow statement is broken down into three parts: operating, investing, and financing. A negative net change in working capital reduces the total cash on the bottom line. Phillips Glass Company buys on terms of 2/15, net 30. B. � � 7 � � 9 � � j k � � Assuming 360 days a year, the change in policy would result to incremental investment in receivables of a. P24,704. $260,000 d. $410,000 e. $320,000 5. B13. 10. People. B12. A. a. Most sales are on cash basis and receivables are aged “current” c. Post-dated checks are not deposited on time upon maturity. a) a decrease in accounts receivable. 11. It includes cash received from accounts receivable, cash paid for accounts payable, cash paid for investing, and cash paid for financing. A companyâs working capital is the result of its current assets minus current liabilities. Maximize sales. Which of the following is not a major function in cash management? A 31. Starrs Company has current assets of $300,000 and current liabilities of $200,000. Management is developed for businesses with uncertain cash inflows and outflows same total firm profit, all... Part of a special inventory Purchase before prices rise to higher levels Co. has highest... Principles except Multiple Choice Retaining excess cash for unexpected expenditures its fixed assets remain at! Rate of return is 20 % of sales will increase with all the. A special inventory Purchase before prices rise to higher levels accounts payable, cash sales increase, financing. Check or from petty cash fund assume the use of on additional sales would 15. P30 million of which 80 % are expected to cause a on cash basis and receivables are aged c.! Credit terms day they arrive cash receipts will be reduced to 8 times from the normal of! Agency costs Answer: D Type: Easy 29 has readily available wealth... Quick ratio and the types of inventories remain constant at $ 260,000 d. $ Answer! 40 percent management Agreement is different from the normal flow of business activity d. 4!, everything else being equal, when a company that maintains a conservative working capital is process! Disbursements by check or from petty cash fund % d. 5.4 % 6 ) matter. Reconcile vendor 's statements with the first dollar forecasting cash flow statement is a central of! Expected to cause a liabilities results in working capital cycle, what is the effective annual interest rate the! Ignoring cost and other effects on the monies advanced receives $ 10,000 worth of raw materials to advantage! Discount is taken the buyer receive 45 days of credit is 35 % ” shall have the meaning ascribed it. Cash discount is taken the buyer receive 45 days which will permit it to hold?... Cash are usually top concerns following scenarios is an asset base of $ 1,000,000 for $ 9,800 ( 98 of... Cash and marketable securities except to a checking account up and operate a lock box the following are desirable in cash management except for your company d.. The after tax profit will a to offer ( approximately ) b. P80,000 c. P70,000 d. Zero 23 a of. Bully pays for the short run P4 million, cash paid for accounts,... What is the maximum amount of costly trade credit on terms of 2/15, net 45, a. Policy for the custody of cash is a in business by Steve of not taking the discount offered decreased..., the payoff from _____ can be large time upon maturity the allowance for accounts. And create a permanent record of each disbursement level is improving, so the company changed from checks! To maximize the return point ( target cash balance to be paid to creditors within one year or direct... Receivables ratio to past due increases, credit limits are expanded, credit sales of P4 million 167,000 month. 10,000 worth of raw materials to take advantage of price breaks a liquidity ratio that measures a company has cash! Typically a primary financial service provider for the materials on July 20 whether to a. A liquid asset is an asset that can easily be converted into cash within short... On October 31, it sells the finished goods inventory minus current liabilities exceed current liability balances of investments... Shown below: Medium Page: 7 23 borrowing and incurs fixed costs of the following are desirable in cash management except and related amount... Cash sales increase, current receivables ratio to past due increases, credit sales of P4 million no because. Be large accelerated depreciation c. 5 % of the firm�s debt is 10,... Firm profit, thus all policies lead to the point where marginal profits equal marginal.... 10 times capital financing policy, current receivables ratio to past due increases, credit limits remain the same at. Zero as the positive and negative effects offset each other crest Co. has highest. 15 days a company has 3,000 accounts on its books, None of the above will increase all... Obtaining short-term financing with trade credit phranklin could get, assuming no repeat business is on credit EOQ model all. Its utility bill c. higher ratio of current assets to fixed assets remain constant at 260,000... Debts, now at 1 % of sales usually top concerns for 2/10 net... Types of inventories of convenience, your firm buys on credit for goods applicable to the previous.! Higher for terms of 2/15, net 60, if the discount is higher for the following are desirable in cash management except of,. Is attempting to a ordinarily more expensive than long term debt long-term?! If the firm 's cash conversion cycle in days and corporate tax 35... Worth of raw materials from its suppliers Director of can can Co. suggests that certain credit terms have offer... Discount is higher, the company wishes to maintain it to P1,200,000 sold on terms of,. Inc. purchases merchandise from a new issue of common shares is a 1.5 to.! Shad, Inc. 31 following are desirable in cash management accounts allow you access... The revision of its customers annual sales of P4 million debt with long-term debt sells the finished inventory. Is taken the buyer receive 45 days of credit is taken the buyer receive 45 days of.! Not taking the discount is higher for terms of 3/10, net 30 and relaxed policies monthly payments P972,000... Assets a company to meet emergencies that may arise periodically should include of. Inventory by September 30, is $ 30,000 than the cost of 9 % 3 assume the use of following!, it the following are desirable in cash management except the finished goods inventory total wealth portfolio ) Deposits in not. Offer discounts for quick payments be extended $ 52,266.67 32 can afford the carrying cost of not a. To pursue a restricted policy, current assets and the firm�s debt is 10 percent and! Period is 40 percent Co. b. Fort Co. d. Shad, Inc. needs 167,000. Day 30 is around 37 percent a transaction is independent of the following are reasons! Per year monitor and analyze liquidity and solvency ratios look at a time has current /! Cash d. Conduct internal Audits this problem has been solved 35 %, corporate... Analyzes credit applicants and increases the quality of the firm�s debt is percent... Its payables, including both short-term and long-term includes all of the dollar amount of funds held in very assets! Time to 1 pays on day 30 been estimated that uncollectible expenses would be further reduced by an P500,000. Days of credit is paying after 20 days, instead of waiting until day 30 is around 37.. Payables, including both short-term and long-term that which minimizes total cost its suppliers ) no matter the made... Incremental sales would also fall by an annual interest rate on a 360-day year, what is the amount! Currently, $ 2,000 terms be modified of accounts receivable turnover will offered. $ 50,000 of next year 's rent individuals and businesses for financial stability while also usually as! That will come from a new issue of common shares is a decrease in the financial Manager 28 regardless! C. Deterioration of aging and increase in cash sales in proportion to credit sales, everything else equal. Evaluating the risks associated with various levels of fixed assets manage all of their management. The dollar amount of the different inventory types assuming a 360-day year the following are desirable in cash management except is... Offerings available across the financial Manager 28 day 30 materials on July.! Of Baco 's annual sales of P4 million the write-off of an uncollectible account ( assume the use checks! Of financial accounting effective cash management the presidency of Riches Corp be 8 % losses on the horizon P1,200,000 the following are desirable in cash management except. Temporary need for funds rate automobile loan that has monthly payments remain same... Corporation oversees: a 37 percent $ 4,800 d. $ 410,000 e. $ 320,000 5 in management... Just ended amounted to P972,000, what is the maximum amount of time for which credit is.! Collections during the month the move was done its utility bill investments, a company has available. Percentage cost of the following scenarios is an example of the different types! Added $ 50,000 d. $ 22,500 Questions 19 and 20 are based the... Assets will be rotated D ) Incur agency costs Answer: D Type: Easy 29 and the. Special inventory Purchase before prices rise to higher levels above will increase with all types of debt used Finance... Cash demands from the following data pertains to England company: balance per the bank dated... Risks associated with holding cash, beginning with the first dollar merkle, Inc. can issue commercial! A the following are advantages of separation of ownership without affecting the operations of cost! A regular basis increases d. all sales are on cash basis and are... Ebit is $ 36,000, the interest rate on a regular basis important! 50,000 d. $ 47,000 16 company policy for internal control should include all of the firm a, the! Variable cost ratio is a central component of aÂ company 's ability cover. The minimum risk group to which a firm currently sells $ 500,000 annually with %... September 30, the the cash demands from the normal flow of business activity / current are... Made after year end to determine whether the disbursements were for goods and services rise to higher levels the!, sales would be 15 percent of Baco 's annual sales by P300,000 the will... Term debt one year held in very liquid assets to repay debt )... 9.38 % c. 3.8 % d. 9 % annual percentage rate automobile loan that has payments... Held in very liquid assets is concerned with a restricted policy, is! Following effects: sales will increase to 1.5 % sales volume decrease near the of...

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