1. Which of the following statements is most consistent with efficient inventory management? The firm has a

below average inventory turnover ratio.

low incidence of production schedule disruptions.

below average total assets turnover ratio.

relatively high current ratio.

relatively low DSO.

 

2. Which of the following actions would be likely to shorten the cash conversion cycle?

Adopt a new manufacturing process that speeds up the conversion of raw materials to finished goods from 20 days to 10 days.

Change the credit terms offered to customers from 3/10 net 30 to 1/10 net 50.

Begin to take discounts on inventory purchases; we buy on terms of 2/10 net 30.

Adopt a new manufacturing process that saves some labor costs but slows down the conversion of raw materials to finished goods from 10 days to 20 days.

Change the credit terms offered to customers from 2/10 net 30 to 1/10 net 60.

 

3. A lockbox plan is

used to protect cash, i.e., to keep it from being stolen.

used to identify inventory safety stocks.

used to slow down the collection of checks our firm writes.

used to speed up the collection of checks received.

used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks.

 

4. Which of the following items should a company report directly in its monthly cash budget?

Its monthly depreciation expense.

Cash proceeds from selling one of its divisions.

Accrued interest on zero coupon bonds that it issued.

New shares issued in a stock split.

New shares issued in a stock dividend.