SOLVED

21) What is the Pattern of Credit Sale Cash Receipts compared to in order to monitor cash collections? A) The sales forecast. B) The Pro Forma Balance Sheet. C) The Pro Forma Cash Flow Statement. D) The Cash Flow budget. E) The aging schedule of receivables. 22) A company has sales revenue of $85,000 in January. It collects $21,250 in January, $22,813 in February, $26,500 in March and $14,437 in April. Using the pattern of credit sales cash receipts, what is the proportion of receivables outstanding at February month-end? A) 25.0% B) 35.8% C) 48.2% D) 64.2% E) 75% 23) Mirabeau Glass & Window Ltd. operates in a highly competitive environment where products are custom-designed for large, well-established, construction companies who use standard contractual terms to compare bids. Which is the best of the following methods for Mirabeau to use to minimize risk of non-payment? A) Require, in the terms of sale, that the construction company pays part of the value of the contract in advance. B) Agree to off-set what the construction company owes for services it will provide to Mirabeau. C) Agree that legal title to the windows or other glass products does not pass to the construction companies until Mirabeau is paid. D) Require a third-party guarantee from a financially sound business that will pay Mirabeau if the construction company does not. E) Take out insurance against the risk of non-payment. 24) When using a cash control model which targets a specific cash balance, what is the problem associated with the cash level breaching the upper, outer limit for an unacceptable length of time? A) The inability to meet short term financial commitments. B) The risk of theft. C) The opportunity cost of foregone interest. D) A rise in the cost of capital. E) A negative impact on the company’s credit rating. 25) Coastal Coffee Distributors Ltd. has sales revenue of $750,000, $850,000, $550,000 and $450,000 from June through September. The company’s collection pattern is to collect 20% of sales in the first 30 days, 70% in the next 30 days and 10% in the 30 days after that. There are monthly interest and fixed expenses of $245,500. Variable costs which equal 55% of Sales Revenue comprise accounts payable and are paid the month after they are incurred. There is a cash surplus in July of $49,000. In August the company will require a $90,000 down payment for new vehicles being purchased and in September it will make a 3rd quarter income tax payment of $16,500. After generating the Cash Flow Budget, what will be September’s cash balance? A) Surplus of $21,500 B) Surplus of $127,000 C) Surplus of $241,500 D) Shortfall of $27,500 E) Shortfall of $53,500 26) Coronation Computers Sales and Service has annual sales revenue of $2,628,000, cost of goods sold of $1,182,600, an opening inventory of $340,000, a closing inventory of $308,000, and accounts receivable of $345,600. If it purchases all of its inventory on credit and carries accounts payable of $194,400, what is the length of the operating cash cycle (OOC) for the business? A) 66 B) 88 C) 108 D) 120 E) 208 27) What is the risk in using a bank overdraft as a source of financing? A) The company’s indebtedness will grow beyond its ability to handle it. B) Its cost exceeds that of the company’s weighted average cost of capital. C) It will negatively impact the credit rating of the company. D) Interest costs cannot be deducted from income taxes. E) It may have to be paid in full with little prior notice. 28) Bonito Fine Drapery Ltd. requires a deposit of 50% of the total cost of draperies from its customers on the date the contract is signed and requires final cash payment on the date of installation. It purchases materials immediately for each order and gets same-day delivery on fabric, trim and drapery hardware. Including the occasional delays and rescheduling of installation dates, the final payment is usually made an average of 20 days after the initial order is signed. The company always pays its suppliers in 30 days. What is the length of the company’s operating cash cycle? A) 20 days B) 10 days C) 5 days D) zero days E) (10 days) 29) If Jonas Movers Ltd. chooses to forego the 3% discount offered by its corrugated box supplier if the invoice is paid with 15 days in favour of paying in 50 days, using the approximation formula, what will the oversight cost Jonas in terms of an annualized rate? A) 18.3% B) 21.9% C) 31.3% D) 36.5% E) 73.0% 30) What is the name of the process whereby an external organization takes over the responsibility for the prompt collection of receivables? A) Outsourcing B) Pro-rating C) Capitalizing D) Monetizing E) Factoring