ACYFMG1 Quiz 3 PDF October 2022

10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Quiz #3 FMG1 K37 Due Oct 18 at 12pm Points 100 Questions 40 Available Oct 18 at 9am - Oct 18 at 12pm 3 hours Time Limit 180 Minutes Instructions This quiz covers topic...

10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Quiz #3 FMG1 K37 Due Oct 18 at 12pm Points 100 Questions 40 Available Oct 18 at 9am - Oct 18 at 12pm 3 hours Time Limit 180 Minutes Instructions This quiz covers topics 4.1-4.5 with a duration of 3 hours with a total of 100 pts. Kindly open your announcement page as well while taking this quiz to be updated for any corrections/ clarifications. If you have any questions/ clarifications during the quiz, you can message your faculty via Animospace. For problem solving questions, please do not round-off in between calculation, round-off final answers to 2 decimal places unless otherwise stated in the question. All answers in percentage should be entered in their decimal form up to 4 decimal places (e.g. 10.11% should be entered as 0.1011). No solutions required hence no partial points. Only answers submitted in the online quiz will be considered. Please double check final answers before submission because the following corrections shall not be reconsidered: Non-compliance with quiz instructions (e.g. incorrect format) Encoding error (slide error, transposition error, etc.) Rounding-off error In the event that you got disconnected while taking the quiz, please capture a screenshot and send it to your faculty as soon as you got your connection back. Your faculty will just coordinate with you regarding this. This quiz was locked Oct 18 at 12pm. Attempt History Attempt Time Score LATEST Attempt 1 155 minutes 81 out of 100  Correct answers are no longer available. Score for this quiz: 81 out of 100 Submitted Oct 18 at 11:38am https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 1/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 This attempt took 155 minutes. Incorrect Question 1 0 / 1 pts Economic order quantity (EOQ) aims to minimize total ordering costs in determining the inventory order quantity. True False Incorrect Question 2 0 / 1 pts One of the Baumol model's unrealistic assumptions is that the firm has a constant, perfectly predictable distribution rate for cash. True False Question 3 1 / 1 pts Collectability is one of the "five C's" of credit analysis. True False https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 2/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Question 4 1 / 1 pts To take advantage of float, a firm should reduce its collection float. True False Question 5 1 / 1 pts If a firm has accounts payable deferral period of zero day, then the length of its operating cycle will the same as that of its cash conversion cycle. True False Question 6 1 / 1 pts Increasing a firm’s inventory order size would result a lower total ordering cost but higher carrying costs. True False Question 7 1 / 1 pts https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 3/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Too much investment in current assets reduces firm's profitability, whereas too little investment in current assets increases the risk of not being able to pay debts as they come due. True False Question 8 1 / 1 pts The delay between the firm sending out a payment and the money being taken out of the firm’s bank account refers to collection float. True False Incorrect Question 9 0 / 1 pts The purpose of working capital management is to achieve as low a level of current liabilities as possible. True False Question 10 1 / 1 pts https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 4/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Because managing inventory is just like managing any other investment, decisions about the level of inventory should be guided by the effect of inventory levels on sales. True False Question 11 2 / 2 pts Which of these is the requirement of the firm to keep a certain percentage of the borrowed money deposited in the firm's bank accounts, whereby the bank agrees to lend money to the firm? discount loan flotation costs commitment fee compensating balance Question 12 2 / 2 pts Which of the following is a checking account that the firm sets up so that the bank agrees to automatically transfer funds from an interest-bearing account to pay off any checks presented? wire transfers https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 5/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 concentration banking zero-balance account lockbox system Question 13 2 / 2 pts Which of the following actions will cause a firm's investment in net working capital to increase? All of three answers are correct. The firm uses more trade credit. The firm decreases its inventory in anticipation of lower sales. The firm relaxes its credit policy. Question 14 2 / 2 pts All of the following are different techniques that can be used to help firms reduce collection float EXCEPT: using drafts. using a lockbox system. using wire transfers. using concentration banking. https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 6/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Question 15 2 / 2 pts When the firm finances its seasonal current asset demand with short-term bank loan while its permanent current assets are financed with long-term debt and equity, the firm is said to follow a: Aggressive financing policy Conservative financing policy Indifferent financing policy Maturity matching policy Question 16 2 / 2 pts A firm wants to reduce its cash cycle. Which of the following actions will reduce its cash cycle? All of three answers are correct. The firm reduces its days' sales outstanding. The firm increases its inventory. The firm reduces its accounts payable. Question 17 2 / 2 pts https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 7/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 If the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare: a detailed analysis of its collection float. a credit analysis. an aging schedule. an analysis of the cash cycle. Question 18 2 / 2 pts Under the Baumol model, the optimal cash replenishment level will increase when: All of three answers are correct. the transaction cost increases. the annual demand for cash increases. the interest rate decreases. Question 19 2 / 2 pts If the firm was to shift P130,000 of current assets to fixed assets, the firm's net working capital would ________, and the risk of insolvency would ________, respectively. https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 8/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 increase; increase decrease; decrease decrease; increase increase; decrease Question 20 2 / 2 pts A decrease in the production time to manufacture a finished good will result in ________. a decrease in the average collection period an increase in the average age of inventory an increase in the operating cycle a decrease in the cash conversion cycle Question 21 2 / 2 pts The ________ is a technique that divides inventory into three groups, according to peso investment. LIFO model EOQ model JIT system https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 9/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 ABC system Question 22 2 / 2 pts The cost of giving up a cash discount on a credit purchase is ________. added on to the price of the goods in order to make payment quickly the true purchase price of the goods deducted from the price of the goods in order to make payment quickly the implied interest rate paid in order to delay payment for an additional number of days Question 23 2 / 2 pts The ________ is a key dimension of credit selection which analyzes the amount of assets an applicant has available for use in securing the credit. On the other hand, the key dimension of credit selection which analyzes an applicant's ability to repay the requested credit focused on cash flows available is ________. Capital, character Character, collateral Capacity, capital Collateral, capacity https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 10/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Question 24 2 / 2 pts When a firm's credit standards are tightened , its contribution margin is expected to _____; carrying cost on Accounts Receivable investment is expected to ___; and cost of bad debt expense is expected to _____. Decrease, increase, increase Increase, decrease, increase Decrease, decrease, decrease Increase, increase, increase Question 25 2 / 2 pts Commercial paper is ________. sold at a premium from its par value sold at a discount from its par value sold at its par value sold at the prime rate Question 26 4 / 4 pts https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 11/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 If a firm has a cash cycle of 23 days and an operating cycle of 82 days, what is its average payment period? 59 Incorrect Question 27 0 / 4 pts In line with your application for a one-year P1 million loan, your bank informed you that the loan will carry a 12.5% interest. The bank also offered you a P1 million loan with a lower interest rate of 12% if you will maintain a compensating balance. If you normally maintains an average of P50,000 with the bank, at what compensating balance would you be indifferent between taking and not taking the lower interest rate offer? 40,000 Incorrect Question 28 0 / 4 pts The next 2 questions will make use of the following information about Studio San. This information will be shown repeatedly for each question for easy referencing. Studio San, a dealer in contemporary art, has forecasted its total current assets for the last quarter of the year as follows: Month Current Assets October 950,000 https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 12/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 November 1,480,000 December 2,100,000 The firm projects that short-term funds will cost 10% and long-term funds will cost 13% annually. The firm’s permanent level of current assets is P650,000 per month, P50,000 of which will be funded by spontaneous current liabilities. Assume that the firm may borrow short-term funds on a monthly basis. If the firm uses a maturity matching financing policy, calculate the current assets financing costs for the next quarter. 99,500 Incorrect Question 29 0 / 4 pts Studio San, a dealer in contemporary art, has forecasted its total current assets for the last quarter of the year as follows: Month Current Assets October 950,000 November 1,480,000 December 2,100,000 The firm projects that short-term funds will cost 10% and long-term funds will cost 13% annually. The firm’s permanent level of current assets is P650,000 per month, P50,000 of which will be funded by spontaneous current liabilities. Assume that the firm may borrow short-term funds on a monthly basis. https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 13/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 How much would be the current asset financing costs for the next quarter if the firm uses a conservative financing policy wherein the average monthly seasonal fund requirement will be funded by long-term debt? 68,250 Question 30 4 / 4 pts Rose N More Resources faces a smooth monthly demand for cash of 360,500, incurs transaction costs of P120 every time they sell marketable securities, and can earn 4.5% on their marketable securities. Using the Baumol model, what will be their optimal cash replenishment level? 151,894.7 Incorrect Question 31 0 / 4 pts The Steel Works, Inc. is required to carry a minimum of 30 days' raw steel, which is 210 tons. It takes 16 days between order and delivery. Steel Works should reorder whenever raw steel inventory reaches ___ tons. 112 Question 32 4 / 4 pts https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 14/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 MC Enterprises estimates that it takes, on average, five days for their customers' payments to reach them, two days for the payments to be processed and deposited by their bookkeeping department, and one more day for the checks to clear once they're deposited. What is their collection float in days? 8 Question 33 4 / 4 pts The next 3 questions will make use of the following information about Fizzy Animators. This information will be shown repeatedly for each question for easy referencing. Fizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3% cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is P725,000 per film, variable cost per film is P530,000, and the average cost per film is P601,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year, that 60% of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5% of sales. The firm can invest freed-up working capital funds in short-term investments earning 8%. (Assume a 360-day year.) What is the cost savings (additional cost) on marginal investment in accounts receivable under the proposed plan? Indicate negative sign if additional cost. A succeeding question is related to this question, kindly take note of your answer before proceeding to the next question. https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 15/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 2,791,333.33 Question 34 4 / 4 pts Fizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3% cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is P725,000 per film, variable cost per film is P530,000, and the average cost per film is P601,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year, that 60% of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5% of sales. The firm can invest freed-up working capital funds in short-term investments earning 8%. (Assume a 360-day year.) What is the cost savings (additional cost) of the marginal cash discount? Indicate negative sign if additional cost. A succeeding question is related to this question, kindly take note of your answer before proceeding to the next question. -5,350,500 Question 35 4 / 4 pts Fizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3% cash discount for payment https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 16/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is P725,000 per film, variable cost per film is P530,000, and the average cost per film is P601,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year, that 60% of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5% of sales. The firm can invest freed-up working capital funds in short-term investments earning 8%. (Assume a 360-day year.) What is the net benefit (loss) of the plan to offer cash discount? Indicate negative sign if net loss. 840,833.33 Question 36 4 / 4 pts Suppose that Mack Industries has annual sales of P10 million, cost of goods sold of P6.4 million, average inventories of P1 million, and average accounts receivable of P600,000. Assuming that all of Mack's sales are on credit, what will be the firm's operating cycle in days? Assume a 360- day year. 77.85 Question 37 4 / 4 pts Carry-all Solutions issued P1,000,000 of commercial paper for P992,500 for 45 days. Floatation costs totaled P22,000. Based on this information, https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 17/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 the effective annual rate of interest on the commercial paper would be ________ (assume 360 days in a year). Indicate your final answer in decimal form with 4 decimal places (e.g. 7.09% should be entered as 0.0709). 0.2432 Question 38 4 / 4 pts The next 2 questions will make use of the following information about Marsman Co. This information will be shown repeatedly for each question for easy referencing. Marsman Co. has determined the following for a given year: Estimated annual usage in units 2,000,000 units Total cost to place purchase orders for the year P40,000 Number of orders placed during the year 160 Cost to carry one unit for one year P 4 What is Marsman’s economic order quantity? Round-up your answer to the nearest unit (e.g. 33.25 should be entered as 34). A succeeding question is related to this question, kindly take note of your answer before proceeding to the next question. 15,812 Question 39 4 / 4 pts https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 18/19 10/26/22, 11:36 AM Quiz #3 FMG1 K37: [1221_ACYFMG1_K37] - FINANCIAL MANAGEMENT 1 Marsman Co. has determined the following for a given year: Estimated annual usage in units 2,000,000 units Total cost to place purchase orders for the year P40,000 Number of orders placed during the year 160 Cost to carry one unit for one year P 4 If the supplier offered Marsman a quantity discount of P0.01 per unit if it orders at least 20,000 units, compute for the net cost savings (additional cost) of ordering 20,000 units as opposed to ordering using the EOQ. Indicate negative sign of additional cost. 18,245.55 Question 40 4 / 4 pts Painter’s Printing is considering implementing a lockbox system that is expected to reduce average collection time by 2.5 days. On an average day, the company receives 320 checks with an average value of P265 each. The interest rate on Treasury bill is 6.6%. What is the net benefit (cost) of the lockbox system if it would cost the firm P8,400 per year? Indicate negative sign if net cost. 5,592 Quiz Score: 81 out of 100 https://dlsu.instructure.com/courses/103608/assignments/979519/submissions/23963 19/19