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Commerce and BusinessbackBusinessbackCorporate Finance/Financial ManagementbackFundamentals of Corporate FinancebackPractice Set 2491back

Credit And Inventory Management

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Question 1
Free
Multiple Choice

Blackwell Brothers sells men's suits.The store offers a 1 percent discount if payment is received within 10 days.Otherwise,payment is due within 30 days.This credit offering is referred to as the:

Choose correct answer/s
A

terms of sale.

B

credit analysis.

C

collection policy.

D

payables policy.

E

collection float.

Check answer
Question 2
Free
Multiple Choice

Jillian was recently hired by a major retail store.Her job is to determine the probability that individual customers will fail to pay for their charge sales.Jillian's job best relates to which one of the following?

Choose correct answer/s
A

terms of sale

B

credit analysis

C

collection policy

D

payables policy

E

customer service

Check answer
Question 3
Free
Multiple Choice

Town Hardware sells goods on credit with payment due 30 days after purchase.If payment is not received by the 30th day,the store mails a friendly reminder to the customer.If payment is not received by the 45th day,the store calls the customer and requests payment and also stops offering credit to that customer.These procedures are referred to as the store's:

Choose correct answer/s
A

customer service policy.

B

credit policy.

C

collection policy.

D

payables policy.

E

disbursements policy.

Check answer
Question 4
Free
Multiple Choice

Phil's Print Shop grants its customers the right to pay for their print jobs within 30 days of the date of service.This 30-day period is referred to as the:

Choose correct answer/s
A

payables period.

B

cash cycle.

C

transactions period.

D

credit period.

E

disbursement period.

Check answer
Question 5
Free
Multiple Choice

Scott purchased a shovel,a rake,and a wheelbarrow from The Local Hardware Store yesterday.Today,the store issued a bill for these items and mailed it to Scott.What is the name given to this bill?

Choose correct answer/s
A

ledger statement

B

warranty

C

indenture

D

receipt

E

invoice

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Question 6
Multiple Choice

Geoff Industries offers its credit customers a 2 percent discount if they pay within 10 days.This discount is referred to as a:

Choose correct answer/s
A
cash discount.
B
purchase discount.
C
collection discount.
D
market discount.
E
receivables discount.
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Question 7
Multiple Choice

Any written proof that a customer owes you money for goods or services provided is referred to as a(n):

Choose correct answer/s
A
account document.
B
sales draft.
C
credit instrument.
D
commercial paper.
E
letter of debt.
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Question 8
Multiple Choice

You are viewing a graph which compares costs with the amount of credit extended.Both the carrying costs and the opportunity costs of credit are depicted.What is the function called that represents the summation of these carrying and opportunity costs?

Choose correct answer/s
A
opportunity cost curve
B
credit extension curve
C
credit cost curve
D
terms of sale graph
E
optimal sales graph
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Question 9
Multiple Choice

Assume that RSF is a wholly-owned subsidiary of the Rolled Steel Company.RSF provides credit financing solely for large ticket items purchased from the Rolled Steel Company.Which one of the following terms describes RSF?

Choose correct answer/s
A
credit department
B
parent company
C
captive finance company
D
credit union
E
service unit
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Question 10
Multiple Choice

The basic factors to be evaluated in the credit evaluation process,the five Cs of credit,are:

Choose correct answer/s
A
conditions, control, cessation, capital, and capacity.
B
conditions, character, capital, control, and capacity.
C
capital, collateral, control, character, and capacity.
D
character, capacity, control, cessation, and collateral.
E
character, capacity, capital, collateral, and conditions.
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Question 11
Multiple Choice

Roger's Home Appliances offers credit to customers it deems worthy of this privilege.To determine if a customer is worthy,the firm computes a numerical value which is used to estimate the probability that the customer will default if credit is granted to them.The process of computing this numerical value is referred to as:

Choose correct answer/s
A
credit scoring.
B
credit capacity.
C
receipts assessment.
D
conditions for credit.
E
consumer analysis.
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Question 12
Multiple Choice

You have recently been hired as an accounting intern for Jefferson Mills.The job that you have been assigned for today is to compile a spreadsheet that has six columns.The column headings are: Invoice #; Customer name; < 30 days; 31-60 days; 61-90 days; > 90 days.You are to list every unpaid invoice by customer name with the amount owed entered into the appropriate column for the number of days between the sale date and today.Once you have completed that,you are to sort the report by customer name and then total the amounts listed in each column.What is this report called?

Choose correct answer/s
A
credit report
B
aging schedule
C
risk assessment report
D
turnover delineation
E
receivables consolidation report
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Question 13
Multiple Choice

Bill is in charge of the inventory for Home Builder's Supply.As an inventory item gets low,he is to restock the item by a quantity that minimizes the total inventory costs for that item.What is this restocking quantity called?

Choose correct answer/s
A
short order quantity
B
refill unit quantity
C
economic order quantity
D
minimum stock level
E
re-order limit
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Question 14
Multiple Choice

Allison has developed a set of procedures for determining the amount of each raw material that she needs to have in inventory if she is to keep her firm's assembly lines operating efficiently.These procedures are commonly referred to by which one of the following terms?

Choose correct answer/s
A
first-in, first-out method
B
the Baumol model
C
net working capital planning
D
economic order procedures
E
materials requirements planning
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Question 15
Multiple Choice

Which one of the following is a system for managing demand-dependent inventories that minimizes the inventory levels of a firm?

Choose correct answer/s
A
just-in-time inventory
B
turnover planning
C
net working capital planning
D
inventory scoring
E
inventory ranking
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Question 16
Multiple Choice

The terms of sale generally include which of the following?
I)type of credit instrument
II)cash discount
III)credit period
IV)discount period

Choose correct answer/s
A
I and III only
B
II and IV only
C
III and IV only
D
II, III, and IV only
E
I, II, III, and IV
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Question 17
Multiple Choice

What is the primary purpose of credit analysis?

Choose correct answer/s
A
determine the optimal credit period
B
establish the effectiveness of granting a cash discount
C
determine the optimal discount period, if any
D
access the frequency and amount of sales by customer
E
evaluate whether or not a customer will pay
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Question 18
Multiple Choice

The period of time that extends from the day a credit sale is made until the day the bank credits a firm's account with the payment for that sale is known as the _____ period.

Choose correct answer/s
A
float
B
cash collection
C
sales
D
accounts receivable
E
discount
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Question 19
Multiple Choice

Which one of the following will increase a firm's investment in accounts receivables?

Choose correct answer/s
A
a decrease in the number of days for which credit is granted
B
a decrease in credit sales
C
an increase in cash sales
D
a decrease in the average collection period
E
an increase in average daily credit sales
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Question 20
Multiple Choice

A firm's total investment in receivables depends primarily on the firm's:

Choose correct answer/s
A
total sales and cash discount period.
B
cash to credit sales ratio.
C
bad debt ratio.
D
average collection period and amount of credit sales.
E
amount of credit sales and cash discount percentage.
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