Q. An increase in the firm's receivable turnover ratio means that:
✅ Correct Answer: (A)
it is collecting credit sales more quickly than before.
Financial Management MCQs and Notes
Q. The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the customers take the discount, 62% pay within the net period, and the rest pay within 45 days of invoice. What would receivables be if all customers took the cash discount?
✅ Correct Answer: (A)
Lower than the present level.
Q. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in:
✅ Correct Answer: (A)
an increase in the average collection period.
Q. Which of the following relationships hold true for safety stock?
✅ Correct Answer: (D)
the higher the profit margin per unit, the higher the safety stock necessary.
Q. Costs of not carrying enough inventory include:
✅ Correct Answer: (D)
all of these.
Q. Ninety-percent of X company's total sales of $600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively:
✅ Correct Answer: (C)
73 days and $108,000.
Q. The basic requirement for a firm's marketable securities.
✅ Correct Answer: (D)
All of the above.
Q. Which of the following marketable securities is the obligation of a commercial bank?
✅ Correct Answer: (B)
Negotiable certificate of deposit
Q. Which would be an appropriate investment for temporarily idle corporate cash that will be used to pay quarterly dividends three months from now?
✅ Correct Answer: (C)
Ninety-day commercial paper with a current annual yield of 6.2 percent.
Q. When __________ is greater than zero the project should be accepted.
✅ Correct Answer: (C)
Net present value