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Q:
Days in inventory is equal to the number of days a firm waits to be paid for inventory that has been sold.
a. True
b. False
Q:
Carries decision to research a new product for her childrens party business is considered an example of a capital budget decision.
a. True
b. False
Q:
The payback period technique measures how long it will take to recover the initial cash outlay and the total amount of interest unearned over the payback period as an opportunity cost.
a. True
b. False
Q:
Accounts receivable are sometimes called near cash because they can be converted to cash whenever a business needs to do so.
a. True
b. False
Q:
The under-capitalization and liquidity problems of a small firm can directly affect the decision-making process, and survival often becomes the top priority.
a. True
b. False
Q:
Small business managers tend to overbuy inventory due to not understanding inventory management.
a. True
b. False
Q:
Every component of working capital has two dimensions: interest and money.
a. True
b. False
Q:
Inventory management and accounts payable management are intertwined.
a. True
b. False
Q:
The internal rate of return method estimates the rate of return that can be expected from a contemplated investment.
a. True
b. False
Q:
The percentage annual interest rate is the rate a business will pay by not taking a discount.
a. True
b. False
Q:
Expenses occur when items are purchased; disbursements are the receipts made later for these expenses.
a. True
b. False
Q:
The management of a small firms long-term assets is called capital budgeting.
a. True
b. False
Q:
A company should pay accounts payable on Day 30 if funds are available.
a. True
b. False
Q:
Days sales outstanding should be decreased to increase accounts receivable conversion.
a. True
b. False
Q:
Improperly managed and uncontrolled stockpiling may greatly increase inventory-carrying costs and place a heavy drain on the funds of a small business.
a. True
b. False
Q:
The goal of the cash conversion period is to have as few days as possible in the process so as to be able to finance other activities with working capital.
a. True
b. False
Q:
Inventory is a concern only for manufacturing companies.
a. True
b. False
Q:
A advantage of the accounting return on investment technique is that it ignores the time value of money.
a. True
b. False
Q:
Factoring account receivables involves the business selling its accounts receivable to a finance company, and the finance company assumes any bad-debt risk.
a. True
b. False
Q:
The goal of the cash conversion period is convert paid-for inventory and accounts receivables into cash as quickly as possible.
a. True
b. False
Q:
Capital budgeting primarily involves short-term decisions on the part of management.
a. True
b. False
Q:
A firm's working capital cycle refers to the flow of cash to purchase and sell fixed assets.
a. True
b. False
Q:
A firms cost of capital is simply the interest rate it must pay on its loans.
a. True
b. False
Q:
The longer the cash conversion period, the greater the potential for cash flow problems to exist for a company.
a. True
b. False
Q:
The extensive use of discounted cash flow tools by a small firm probably has more to do with the nature of the small firm itself than it does with the owners desire to be perceived as a community-minded business person..
a. True
b. False
Q:
Capital budgeting analysis helps managers make decisions about inventory investments.
a. True
b. False
Q:
The disadvantage of accounts receivable financing is the negative impact on cash flow.
a. True
b. False
Q:
Net cash flow should be equated with net profit.
a. True
b. False
Q:
After discussing three techniques for making capital budgeting decisions, which one(s) incorporate the time value of money?
Q:
Firms often use multiple suppliers for important components to mitigate the risks of total supply disruption.
Q:
After identifying the stages of the accounts receivables life cycle, discuss areas that are of concern in the process.
Q:
Which of the following statements is TRUE regarding the 2011 Tohoku earthquake and tsunami?
A) It devastated eastern sections of Japan.
B) Some manufacturers around the globe had been relying exclusively on suppliers located in the affected zones.
C) Japanese-built vehicle outputs for Toyota and Honda were down more than 60% in the month following the disaster.
D) Manufacturers in several industries worldwide took 6 months or longer before they saw their supply chains working normally again.
E) All of the above are true.
Q:
Assume that the cost of certain equipment a business is considering purchasing is $100,000. The equipment will be depreciated over five years, at which point the salvage value is expected to be $8,000. Anticipated after-tax profits (losses) are as follows:
Year After-Tax Profits/Losses
1 ($10,000)
2 20,000
3 25,000
4 35,000
5 20,000
Compute the accounting return on investment technique showing the formulas and computations.
Q:
The Great East Japan Earthquake of 2011 was centered off of the Pacific coast of which region of Japan?
A) Kanto
B) Chubu
C) Tohoku
D) Kansai
E) Chugoku
Q:
Dana produces fine chocolates for her retail shop which is open 6 days a week. The sales are $156,000 annually with a cost of goods sold of 45% of sales and inventory of 5%. Calculate the days in inventory and indicate any concerns for the shop considering the national average is 15 days.
Q:
Unfortunately, not many supply chain metrics exist that can be effectively used to evaluate performance within a company and for its supply chain partners.
Q:
Capital budgeting techniques that compare the present value of future cash flow with the cost of the initial investment
Q:
A container of ball-bearings valued at $25,000, currently located in Houston, TX, needs to be delivered to the Morton, IL, plant. The standard shipment method takes two days. However, for an additional charge of $500, the container can be sent overnight to arrive one day later. The annual holding cost rate for this type of item has been estimated at 28%. Which option is more economical?
Q:
The rate of return a firm expects to earn on a project
Q:
A shipment of parts valued at $75,000 needs to be shipped from Tampa, FL, to Chicago, IL. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?
Q:
A capital budgeting technique that measures the amount of time it will take to recover the initial cash outlay of an investment
Q:
The present value of expected future cash flows less the initial investment outlay
Q:
Identify at least four factors in addition to delivery speed (and its impact on holding cost) that may need to be considered when choosing the best mode of shipment.
Q:
The primary trade-off in transportation mode analysis involves evaluating ________ against the cost of shipping.
Q:
The daily flow of resources through a firms working capital accounts
Q:
Suppose that a product's value is $1000. The manufacturer experiences a holding cost of 2.5% per month. The firm ships the product across country by truck, and it arrives six days later. The shipping cost is $80 per unit. What is the holding cost on each unit shipped? (Assume 30 days per month.)
A) $0.83
B) $5.00
C) $0.07
D) $0.40
E) $150.00
Q:
A capital budgeting technique that compares expected average annual after-tax profits to the average book value of an investment
Q:
An analytical method that helps managers make decisions about long-term investments
Q:
Which of the following would NOT be considered (in addition to delivery speed) when choosing a mode of transportation?
A) on-time delivery
B) coordinating shipments to maintain a schedule
C) getting new products to market
D) keeping a customer happy
E) All of the above may be considered.
Q:
The number of days, on average, that a business takes to pay its accounts payable
Match the term with its definition. Some terms may not be used.
a. Accounting return on investment technique
b. Capital budgeting analysis
c. Discounted cash flow techniques
d. Internal rate of return
e. Net present value
f. Payback period technique
g. Working capital cycle
h. Working capital management
Q:
Typically, a more expensive shipping option is:
A) slower with a lower holding cost.
B) slower with a higher holding cost.
C) faster with a lower holding cost.
D) faster with a higher holding cost.
E) faster, but holding cost is unaffected by delivery speed.
Q:
The time required to convert paid-for inventory and accounts receivable into cash
Q:
The primary trade-off in transportation mode analysis involves evaluating holding cost against the cost of shipping.
Q:
Accounts receivable used as collateral for a loan
Q:
Tommy's Family Furniture is looking for a new supplier for its armchairs. Tommy is primarily interested in only two criterion: price and name brand value. He considers the value of the name brand to be three times more important than price. Tommy has narrowed his choices to two suppliers. On a 10-point scale, he has assigned Amy's Armchairs a score of 8 on price and 5 on name brand value. He has assigned Annie's Armchairs a score of 3 on price and 6 on name brand value. Apply the factor weighting technique to help Tommy choose a new armchair supplier.
Q:
A company is about to select a vendor for the outsourcing of all of its engineering, environmental, and CAD requirements. It has identified four criteria critical to the selection. These criteria, and their importance weights, appear below. Three firms, A, C, and E, have indicated that they are interested in this position. The company has scored each of the three candidates on these criteria, using a 1-10 scale, where 10 is best. Candidate A scored 7, 7, 7, and 5, respectively, on the four criteria. Candidate C scored 9, 4, 8, and 6. Candidate E scored 5, 10, 10, and 7. Which vendor has the highest composite score? Criterion
Weight Engineering expertise
.40 Financial and managerial strength
.20 Integrity
.15 Staff experience and qualifications
.25
Q:
The number of days, on average, that a firm extends credit to its customers
Q:
Briefly describe how to conduct the factor weighting approach to supplier evaluation.
Q:
The management of current assets and current liabilities
Q:
The ________ model adds objectivity to decision making when selecting suppliers.
Q:
The number of days, on average, that a company holds inventory
Q:
Which of the following elements of the factor weighting technique in supplier selection analysis does NOT contain a certain degree of subjectivity?
A) the formula used to calculate the total weighted score for each supplier
B) the weights applied to each supplier criterion
C) the scores for each potential supplier on each criterion
D) the set of supplier criteria
E) the numerical scale used to rate suppliers
Q:
A post office box for receiving remittances from customers
Q:
Which of the following is NOT REQUIRED information to obtain to conduct the factor weighting technique in supplier selection analysis?
A) a set of supplier criteria
B) a weight for each supplier criterion
C) a score for each potential supplier on each criterion
D) a qualitative scale on which to rate suppliers
E) a numerical scale on which to rate suppliers
Q:
The first step in the working capital cycle process is to
a. order inventory.
b. purchase or produce inventory for sale.
c. receive inventory.
d. sell the inventory for cash or credit.
Match the term with its definition. Some terms may not be used.
a. Cash conversion period
b. Cost of capital
c. Days in inventory
d. Days in payables
e. Days sales outstanding
f. Lock box
g. Pledged accounts receivable
h. Working capital management
Q:
An industrial producer is searching for a supplier for ball bearings. Its three most important supplier criteria are price, quality, and delivery reliability. The firm has decided that quality and delivery reliability should carry the same weight, and that each of them are twice as important as price. If the weights sum to 100%, what would a supplier with ratings of 40, 90, and 75 in the three respective categories score as a weighted total?
A) 37
B) 370
C) 49
D) 205
E) 74
Q:
A grocery store is trying to find a new supplier for carrots. Its three most important supplier criteria are freshness, lot size, and cost, with factor weights of 0.6, 0.1, and 0.3, respectively. What would a supplier with ratings of 6, 8, and 10 in the three respective categories score as a weighted total?
A) 24
B) 1
C) 7.4
D) 9.8
E) 8
Q:
Working capital management
a. deals with assigning cash values to employees.
b. is not important to small businesses.
c. involves managing short-term assets and sources of financing.
d. involves managing long-term assets and liabilities.
Q:
Choosing suppliers simply based on the lowest bid has become a somewhat rare approach.
Q:
A reason that a small firm would not use a discounted cash flow technique in evaluating capital investments would be
a. company management has a preference for another quantitative method.
b. liquidity is less of an issue for a small company.
c. non-financial issues may be more important for a small firm.
d. small firms invest more in short-term assets than large companies.
Q:
The factor weighting model is an attempt to add subjectivity to decision making when selecting among suppliers.
Q:
How long will it take to recover the original investment outlay? is answered using
a. accounting ratio analysis.
b. discounted cash flow.
c. net present value.
d. payback period technique.
Q:
When using the factor weighting approach, most companies will use the same list of criteria and the same criteria weights.
Q:
Which statement is true about firms with a cash culture?
a. Cash policies are not their first priority.
b. They are less likely to have good vendor terms.
c. Their metrics are murky.
d. They need less working capital.
Q:
Over the past six months, Wholesale Foods of Fresno has experienced a standard deviation of demand of 600 units. Standard deviation of its orders during that period was 800 units.
(a) What is the bullwhip measure for Wholesale Foods of Fresno?
(b) If Wholesale Foods of Fresno had made a perfect forecast of demand over the past 6 months and had decided to order 1/6 of that demand each month, what would its bullwhip measure have been?
Q:
A company has 30 days in payables, 15 days in inventory, and 20 days for the average collection period. How many days are in the companys cash conversion process?
a. 5
b. 25
c. 45
d. 65
Q:
Consider a supply chain where a manufacturer sells to a distributor who sells to a wholesaler who sells to a retailer. Last year, the retailer's weekly variance of demand was 4000 units. The weekly variance of orders was 5000; 8000; 12,000; and 17,000 units for the retailer, wholesaler, distributor, and manufacturer, respectively. (Note that the variance of orders equals the variance of demand for that firm's supplier.)
(a) Calculate the bullwhip measure for the retailer.
(b) Calculate the bullwhip measure for the wholesaler.
(c) Calculate the bullwhip measure for the distributor.
(d) Calculate the bullwhip measure for the manufacturer.
(e) Which firm appears to be contributing the most to the bullwhip effect in this supply chain?
Q:
If the net present value of a proposed investment is positive,
a. the cost of the investment is more than the present value of the future cash flows.
b. the investment does not earn the required rate of return.
c. the present value of the future cash flows would be unaffected by the proposed investment.
d. the firm should make the investment because the present value of the future cash flows is more than the cost of the investment.
Q:
The third day in the working capital time line is
a. accounts payable are paid.
b. collect accounts receivable.
c. inventory is sold on credit.
d. pay accounts payable.
Q:
Suppose that a firm incurs a demand variance of 400 units per week, and the variance of orders that it places equals 750 per week. What is the value of the bullwhip measure for this company?