BUSI 320 Read & Interact Block, Hirt, & Danielsen Chapter 6 solutions complete answers

BUSI 320 Read & Interact Block, Hirt, & Danielsen Chapter 6 solutions complete answers

 

Firms with predictable cash flow patterns typically can maintain lower liquidity

 

A higher use of long term financing is the more conservative financing approach and can lead to potentially higher profitability

 

The low current ratios of between 1.2 and 1.5, since 2000 can be traced to:

 

In developing a sales forecast, total projected sales (in dollars) can be calculated by multiplying the

 

An aggressive firm utilizing short term financing may be vulnerable to

 

As a rule, an aggressive, risk-orientated firm will use _____ financing.

 

Trade credit is usually

 

The percentage of net working capital is calculated by dividing net working capital by

 

Assume current assets and current liabilities change at the same rate as sales. Accordingly, if sales increase by 15%

 

If a company is using level production and sales are steadily increasing above the forecast amounts 

 

As a rule, during "tight money" periods: 

 

A company has floor displays of merchandise that are maintained throughout the year. The inventory that makes up the floor displays is considered.

 

Some disadvantages of level production are

 

Normally it is most appropriate to finance seasonal increases in current assets with an

 

Problems of inadequate financing arrangements result from the business person’s failure to realize the firm is carrying not only self-liquidating inventory, but also the anomaly of     current assets.

 

The term structure of interest rates refers to

 

Cash receipts include

 

 
 
 
Cash flow is determined by 

A. subtracting cash payments from cash receipts 
B. adding cash receipts to the sales forecast 
C. adding cash payments to cash receipts
 
 
 
As a rule, during tight money periods 

A. rates on short term loans may become very high 
B. short term funds may be difficult to find 
C. interest rates will usually decline 
D. availability of long term funds shouldn't be affected
 
 
 
A risk of using short term funds to finance operations is 

A. if a tight money situation occurs, loans may be hard to obtain 
B. if a tight money situation occurs, interest rates will decrease 
C. if a tight money situation occurs, interest rates will increase
 
 
 
It is most appropriate to finance permanent current assets with 

A. increase in long term debt 
B. increase in current liabilities 
C. increase in owner investment 
D. retention of RE
 
 
 
An asset sold in time to generate the cash needed to pay for itself is called a __________ asset 

A. temporary current 
B. self-liquidating 
C. current 
D. permanent current
 
 
 
When a company's sales increase, the affect on temporary and permanent assets is 

A. temporary assets increase and permanent assets decrease 
B. both increase 
C. temporary assets decreases and permanent assets increases 
D. both decrease
 
 
 
A point of sales terminal 

A. matches current years sales with prior years sales 
B. records the item and quantity sold 
C. provides info to change purchase orders or production schedules
 
 
 
A risk of using short term funds to finance operations is 

A. if a tight money situation occurs, interest rates will decrease 
B. if a tight money situation occurs, loans may be hard to obtain 
C. if a tight money situation occurs, interest rates may increase
 
 
 
Since 1960, the percentage of net working capital divided by sales, for large US non financial companies, has trended lower due to 

A. increases in short term debt 
B. electronic cash flow transfer system 
C. more efficient cash management 
D. point of sales terminals
 
 
 
short term financing plans with high liquidity have 

A. high return and high risk 
B. moderate return and moderate risk 
C. low profit and low risk 
D. None of these
 
 
 
The expectations hypothesis says that _______ interest rates are a function of ________ interest rates 

A. short term, long term 
B. long term, short term
C. short term, short term
D. none of these
 
 
 
Each year your company's inventory increases by $100,000 in advance of the busy season. This inventory increase is considered to be 

A. level current assets 
B. permanent current assets 
C. temporary current assets
 
 
 
Your company's inventory valuation reaches a high of $100,000 before its busy season and a low of $30,000 during its slow season. The $30,000 level of inventory is considered to be 

A. fixed assets 
B. long term assets 
C. permanent current assets
 
 
 
Working capital management involves the financing and management of the __________ assets of the firm 

A. fixed 
B. total 
C. current 
D. none of these
 
 
 
 
 
 
 
 
 
 

 
 
 
Insurance companies would tend to invest in __________ securities 

A. short-term 
B. intermediate term
C. long-term
D. not enough info to answer
 
 
 
The ____________ says that investors must be paid a premium to hold long-term securities 

A. expectations hypothesis 
B. time value theory 
C. segmentation theory 
D. liquidity premium theory
 

 

4.
Assume that current assets and current liabilities change at the same rate as sales. Accordingly, if sales increase by 10%, then?
 
 
5.
Cash flow is determined by ____
 
 
6.
Companies use _______ to provide funds for operations
 
 
7.
Each year your company's inventory increases by $100,000 in advance of the busy season. This inventory increase is considered to be:
 
 
9.
If a company uses long term debt to finance part of short term needs, it is likely ________
 
 
10.
If a company uses short term debt to finance permanent current assets and fixed assets then:
 
 
13.
Some advantages of using level production are:
 
 
15.
Under level production, a simple way to determine the number of units to be produced per month would be to:
 
 
 
 
 
 
 
 
 

 

3.
As a rule, interest rates on short term debt are _____ interest rates on long term debt
 
 
5.
Cash Receipts include:
AR collections
cash sales
sales made on credit
sales orders not yet delivered
 
 
6.
Companies use _____ financing to provide funds for operations
 
 
7.
Each year your company's inventory increases by $100,000 in advance of the busy season. This inventory increase is considered to be
 
 
8.
the high point in the amount of inventory for seasonal business using level production would usually be
 
 
10.
If a company uses short term debt to finance permanent current assets and fixed assets
 
 
12.
Normally it is most appropriate to finance permanent current assets with
 
 
 
 
 
 
 
 
 
 

As a rule during tight money periods

          

 

Normally it is most appropriate to finance permanent current assets with

          

 

Cash flow is determined by

          

 

Place the following steps in the correct order

 

A risk of using short term funds to finance operation is

 

Generally, when a company’s sales increase, the affect on temporary and permanent asset is

          

Your company valuation reaches a high of $100,000 before its busy season and a low of $30,000 during its slow season. The $30,000 level of inventory is considered to be

          

Cash receipts include

          

 

Since 1960, the percentage of net working capital divided by sales, for large US nonfinancial companies has trended lower due to

 

 

If a company uses short term debt to finance permanent current assets and fixed assets

 

Normally it is most appropriate to finance seasonal increase in current assets with an

          

Self liquidating assets are

          

A point of sale terminal

 

 

As a rule, interest rates on short term debts are ______ interest rates on long term debt.

          

Assume that current assets and current liabilities change at he same rate as changes in sales. Therefore if sales increases by 10%, then

          

 

If a company utilizes level production

          

 

As a rule, an aggressive risk oriented firm will use _____financing

 

 

Normally it is most appropriate to finance permanent current assets with

          

 

Place the following steps in the correct