Item 1 of 25Which of the following statements is incorrect about working capital policy?Select the correct response:Credit policy has an impact on working capital since it has the potential to influence sales levels and the speed with which cash is collected.Managing working capital levels is important to the financial staff since it influences financing decisions and overall profitability of the firm.Holding minimal levels of inventory can reduce inventory carrying costs and cannot lead to any adverse effects on profitability.O A company may hold a relatively large amount of cash if it anticipates uncertain sales levels in the coming year.The cash budget is useful in determining future financing needs.

The amount of money a firm invests in current assets in order to accomplish its sales goals is…

Answered: Which of the following statements is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 2P

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Answer true or false. 1. According to the economic order quantity model, the total period cost would depend, among other things, on the size of each order.☐True☐False2. According to the economic order quantity model, there is no lead time for delivery of goods.☐True☐False3. Working capital is the capital of the company.☐True☐False4. Acquiring a fixed asset exclusively with long-term debt reduces net working capital.☐True☐False5. It is in the firm's interest to have a high cash balance at all times.☐True☐False
Answer true or false. 1. According to the economic order quantity model, the total period cost would depend, among other things, on the size of each order.2. According to the economic order quantity model, there is no lead time for delivery of goods.3. Working capital is the capital of the company.4. Acquiring a fixed asset exclusively with long-term debt reduces net working capital.5. It is in the firm's interest to have a high cash balance at all times.
Which of the following is most consistent with using debt to reduce agency costs or conflicts? Question 11 options: Increasing debt reduces a firm’s business risk The interest paid on debt reduces taxable income and income taxes The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly The issuance of debt helps firms increase their credit rating
60) Inadequacies of the existing system of financial ratio signify a need for a different approach to monitoring business performance. Of the following statements, which is NOT a shortcoming of financial ratio? a) financial measures are lagging indictors of business performance. b) Financial ratios have a short-term orientation and emphasize the cash flow rather than the processes that contribute to cash flow. c) Financial Ratio focus equally on the stockholder as on the customers, suppliers and employees. d) A and B e) A and B and C
. Which of the following costs will tend to increase if a firm switches to a restrictive short-term financial policy from a flexible short-term policy?I. lost sales due to out-of-stock itemsII. inventory warehousing costsIII. cash-outsIV. total annual order costs A. I and III only B. II and IV only C. I, III, and IV only D. I, II, and IV only E. I, II, III, and IV
QUESTION 33 Under generally accepted accounting principles, a company can choose among different cost flow assumptions for valuing cost of goods sold that can result in different income reporting. However, a company cannot frequently change the cost flow assumption adopted in order to measure the highest income possible because of the: conservatism principle. going concern principle. stable-dollar principle. consistency principle.
A fellow student studying managerial accounting says. The net present value (NPV) weighs early receipts of cash much more heavily than more distant receipts of cash. Do you agree or disagree? Why?
Which one of the following actions by a financial manager creates an agency problem? Lowering selling prices that will result in increased firm value Agreeing to expand the company at the expense of stockholders' value Borrowing money when doing so creates value for the firm Agreeing to pay management bonuses based on the market value of the firm's stock
Which of the following statements is NOT CORRECT? a. The cash budget is useful for estimating potential funding needs, especially for short-term working capital loans. b. Working capital management is critical because it affects financing decisions and the firm's profitability. c. Credit policy affects working capital because it impacts both sales and the time it takes for receivables to be obtained. d. If a company needs to increase its cash flow from operations in the next month or two, it can change its credit policy from 2/10 net 30 to net 60. e. f a company is unsure about the volume of sales, profits, and cash flows for the coming year, it will retain a relatively large amount of cash and marketable securities.
Your CFO tells you as finance manager that he feels much safer to have a larger inventory and cash level than before. What are trade-offs involved in the decision of how much inventory or cash the firm should carry. Answer for inventory level
12. ______________ is the ultimate objective of a finance manager in a business organization. a. Profit maximization b. On time payment of salaries c. None of the options d. Overall growth of the organization
1. Which of the following statements most appropriately describe how agency cost affect the firms choice structure? Explain. a. When firm owners borrow money they have an incentive to engage in excessive risk taking (that is investing in very risky projects). Since they are managing someone else money.b. When firm have very limited investment opportunities and little debt financing combine with wealth profit that provide them with free cash flow, their management team might squander the firms' earnings on questionable investments. 2. What is the primary weakness of using EBIT-EPS analysis as a financing tool. 3. Why might firms who's sale level change drastically overtime, choose to use debt only sparingly in their capital structure 4. What does the term independence hypothesis means as it applies to capital structure theory 5. Explain how industry norms might be used by the finance manager in the design of the company's financing mix note: if you can provide the source of the info,…

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