Chapter 26
Short-Term Finance and Planning Multiple Choice Questions
1.The length of time between the acquisition of inventory and the collection of cash from receivables is called the:
A.operating cycle.
B.inventory period.
C.accounts receivable period.
D.accounts payable period.
E.cash cycle.
2.The length of time between the acquisition of inventory and its sale is called the:
A.operating cycle.
B.inventory period.
C.accounts receivable period.
D.accounts payable period.
E.cash cycle.
3.The length of time between the sale of inventory and the collection of cash from receivables is called the:
A.operating cycle.
B.inventory period.
C.accounts receivable period.
D.accounts payable period.
E.cash cycle.
4.The length of time between the acquisition of inventory by a firm and the payment by the firm for that inventory is called the:
A.operating cycle.
B.inventory period.
C.accounts receivable period.
D.accounts payable period.
E.cash cycle.
5.The length of time between the payment for inventory and the collection of cash from receivables is called the:
A.operating cycle.
B.inventory period.
C.accounts receivable period.
D.accounts payable period.
E.cash cycle.
6.Costs of the firm that rise with increased levels of investment in its current assets are called _____ costs.
A.carrying
B.shortage
C.order
D.safety
E.trading
7.Costs of the firm that fall with increased levels of investment in its current assets are called _____ costs.
A.carrying
B.shortage
C.debt
D.equity
E.payables
8.The forecast of cash receipts and disbursements for the next planning period is called a:
A.pro forma income statement.
B.statement of cash flows.
C.cash budget.
D.receivables analysis.
E.credit analysis.
9.A prearranged, short-term bank loan made on a formal or informal basis, and typically reviewed for renewal annually, is called a:
A.letter of credit.
B.cleanup loan.
pensating balance.
D.line of credit.
E.roll-over.
10.A prearranged credit agreement with a bank typically open for two or more years is called a:
A.letter of credit.
B.cleanup loan.
pensating balance.
D.line of credit.
E.revolving credit arrangement.
11.A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a:
pensating balance.
B.cleanup loan.
C.letter of credit.
D.line of credit.
E.roll-over.
12.A _____ issued by a bank is a promise by that bank to make a loan if certain conditions are met.
pensating balance
B.cleanup loan
C.letter of credit
D.line credit
E.revolver
