Question 1
When are funds generally transferred into zero-balance accounts?
Multiple Choice
Monthly
Weekly
Daily
As needed
Never
Question 2
Taylor's Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?
Multiple Choice
Collection float increased
Collection float decreased
Disbursement float increased
Disbursement float decreased
Net float remained unchanged
Question 3
The primary purpose of a cash discount is to:
Multiple Choice
compensate customers for an out-of-stock item.
compensate customers for faulty goods or services.
offset the interest charges on an account receivable.
induce customers to pay promptly.
induce customers to purchase specialty items.
Question 4
The terms of sale are best defined as the:
Multiple Choice
total invoice amount including all shipping costs and taxes.
period of time during which a sale price applies.
legal documents related to the credit sale of either goods or services.
conditions under which a firm sells its goods or services for either cash or credit.
process used to determine which customers will be granted credit and which will not.
Question 5
Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding. What is the name given to this listing?
Multiple Choice
Aging schedule
Collection report
Credit evaluation report
Invoice schedule
Terms of credit
Question 6
How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?
Multiple Choice
Immediately
In one day
Between one and two days
In two days
Between two and three days
Question 7
The optimal credit policy of any firm will:
Multiple Choice
maximize sales.
minimize bad debts.
maximize units sold.
minimize the total costs of granting credit.
minimize carrying costs.
Question 8
The primary goal of inventory management is to minimize the:
Multiple Choice
number of orders per year.
average inventory level.
total costs of holding inventory.
level of inventory for the most expensive items.
total opportunity costs.
Question 9
The process of determining the probability that potential customers will not pay is called:
Multiple Choice
credit analysis.
collection policy.
account aging.
credit terms.
customer invoicing.
Question 10
A bill given to a customer for goods he or she purchased is called a(n):
Multiple Choice
account reconciliation.
invoice.
docket.
remittance advice.
shipping receipt.
Question 11
A firm grants credit with terms of 2/10, net 30. The firm's customers have ___ days to pay in order to receive a _____ percent discount.
Multiple Choice
2; 10
10; 2
15; 2
20; 2
30; 20
Question 12
Which statement is correct?
Multiple Choice
Firms cannot use lockboxes if they use cash concentration accounts.
Firms prefer to increase processing delay on disbursements.
Firms prefer to eliminate all types of float.
Firms open regional offices so their employees can pick up lockbox payments throughout the day.
The Check Clearing Act for the 21st Century is designed to reduce total collection time to one day.
Question 13
Which one of the following will tend to increase the length of the credit period?
Multiple Choice
Decrease in product cost
Decrease in consumer demand
Decrease in collateral value
Increase in credit risk
Increase in product standardization
Question 14
Float is defined as the difference between the:
Multiple Choice
beginning and ending cash balances as shown on a cash budget.
ledger balance and the available balance.
book balance and the ledger balance.
collections and disbursements for any given period of time.
available balance and the collected balance.
Question 15
Collection policy refers to the:
Multiple Choice
process of determining which customers will be granted credit.
process of determining the probability that customers will not pay.
set of guidelines used by a firm to determine the cost of offering credit to its customers.
daily process of handling cash inflows and outflows of cash.
set of procedures a firm follows in collecting accounts receivable.
Question 16
Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?
Multiple Choice
Cash budget
5 C's of credit
Credit analysis
Aging schedule
Credit scoring report
Question 17
Credit scoring is the:
Multiple Choice
categorizing of customers into groups based on the length of time it takes each customer to pay for purchases.
compiling of a list of accounts receivables segregated by the length of time each receivable has been outstanding.
evaluation of the opportunity costs of a credit policy.
process of quantifying the probability of default when granting credit to customers.
tracking of both the number and the size of customer orders over a period of time.
Question 18
Which of these is a speculative motive for holding cash?
Multiple Choice
Buying extra inventory because a key supplier offered a special one-time discount
Paying a $100 bonus to all employees at year-end
Paying the annual insurance premium on the firm's assets
Needing to purchase a new delivery truck because the old one was totally destroyed in an accident
Contributing $1,000 to help fund medical care for an uninsured neighbor
Question 19
The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:
Multiple Choice
terms of sale.
receivables factors.
five Cs of credit.
collection policy determinants.
credit scores.
Question 20
BJ's just reconciled its bank account and has $10,800 in outstanding deposits, $26,300 in checks outstanding, and a positive checkbook balance. The firm sells on a cash-only basis and deposits its receipts at the bank daily. The deposited funds are available to the firm the following day. The firm writes and mails checks on a daily basis also. These checks generally clear the bank in three days. What do you know about the firm's float given this information?
Multiple Choice
The firm has disbursements float but no collection float.
The collection float generally exceeds the disbursement float.
The firm has a net collection float.
The disbursement float generally exceeds the collection float.
Since transactions occur daily, the firm has no float.
When are funds generally transferred into zero-balance accounts?
Multiple Choice
Monthly
Weekly
Daily
As needed
Never
Question 2
Taylor's Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?
Multiple Choice
Collection float increased
Collection float decreased
Disbursement float increased
Disbursement float decreased
Net float remained unchanged
Question 3
The primary purpose of a cash discount is to:
Multiple Choice
compensate customers for an out-of-stock item.
compensate customers for faulty goods or services.
offset the interest charges on an account receivable.
induce customers to pay promptly.
induce customers to purchase specialty items.
Question 4
The terms of sale are best defined as the:
Multiple Choice
total invoice amount including all shipping costs and taxes.
period of time during which a sale price applies.
legal documents related to the credit sale of either goods or services.
conditions under which a firm sells its goods or services for either cash or credit.
process used to determine which customers will be granted credit and which will not.
Question 5
Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding. What is the name given to this listing?
Multiple Choice
Aging schedule
Collection report
Credit evaluation report
Invoice schedule
Terms of credit
Question 6
How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?
Multiple Choice
Immediately
In one day
Between one and two days
In two days
Between two and three days
Question 7
The optimal credit policy of any firm will:
Multiple Choice
maximize sales.
minimize bad debts.
maximize units sold.
minimize the total costs of granting credit.
minimize carrying costs.
Question 8
The primary goal of inventory management is to minimize the:
Multiple Choice
number of orders per year.
average inventory level.
total costs of holding inventory.
level of inventory for the most expensive items.
total opportunity costs.
Question 9
The process of determining the probability that potential customers will not pay is called:
Multiple Choice
credit analysis.
collection policy.
account aging.
credit terms.
customer invoicing.
Question 10
A bill given to a customer for goods he or she purchased is called a(n):
Multiple Choice
account reconciliation.
invoice.
docket.
remittance advice.
shipping receipt.
Question 11
A firm grants credit with terms of 2/10, net 30. The firm's customers have ___ days to pay in order to receive a _____ percent discount.
Multiple Choice
2; 10
10; 2
15; 2
20; 2
30; 20
Question 12
Which statement is correct?
Multiple Choice
Firms cannot use lockboxes if they use cash concentration accounts.
Firms prefer to increase processing delay on disbursements.
Firms prefer to eliminate all types of float.
Firms open regional offices so their employees can pick up lockbox payments throughout the day.
The Check Clearing Act for the 21st Century is designed to reduce total collection time to one day.
Question 13
Which one of the following will tend to increase the length of the credit period?
Multiple Choice
Decrease in product cost
Decrease in consumer demand
Decrease in collateral value
Increase in credit risk
Increase in product standardization
Question 14
Float is defined as the difference between the:
Multiple Choice
beginning and ending cash balances as shown on a cash budget.
ledger balance and the available balance.
book balance and the ledger balance.
collections and disbursements for any given period of time.
available balance and the collected balance.
Question 15
Collection policy refers to the:
Multiple Choice
process of determining which customers will be granted credit.
process of determining the probability that customers will not pay.
set of guidelines used by a firm to determine the cost of offering credit to its customers.
daily process of handling cash inflows and outflows of cash.
set of procedures a firm follows in collecting accounts receivable.
Question 16
Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?
Multiple Choice
Cash budget
5 C's of credit
Credit analysis
Aging schedule
Credit scoring report
Question 17
Credit scoring is the:
Multiple Choice
categorizing of customers into groups based on the length of time it takes each customer to pay for purchases.
compiling of a list of accounts receivables segregated by the length of time each receivable has been outstanding.
evaluation of the opportunity costs of a credit policy.
process of quantifying the probability of default when granting credit to customers.
tracking of both the number and the size of customer orders over a period of time.
Question 18
Which of these is a speculative motive for holding cash?
Multiple Choice
Buying extra inventory because a key supplier offered a special one-time discount
Paying a $100 bonus to all employees at year-end
Paying the annual insurance premium on the firm's assets
Needing to purchase a new delivery truck because the old one was totally destroyed in an accident
Contributing $1,000 to help fund medical care for an uninsured neighbor
Question 19
The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:
Multiple Choice
terms of sale.
receivables factors.
five Cs of credit.
collection policy determinants.
credit scores.
Question 20
BJ's just reconciled its bank account and has $10,800 in outstanding deposits, $26,300 in checks outstanding, and a positive checkbook balance. The firm sells on a cash-only basis and deposits its receipts at the bank daily. The deposited funds are available to the firm the following day. The firm writes and mails checks on a daily basis also. These checks generally clear the bank in three days. What do you know about the firm's float given this information?
Multiple Choice
The firm has disbursements float but no collection float.
The collection float generally exceeds the disbursement float.
The firm has a net collection float.
The disbursement float generally exceeds the collection float.
Since transactions occur daily, the firm has no float.
