# Financial Management Quiz

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### Financial Management Quiz

ABC Corporation currently has an inventory turnover of 15.7, a payables turnover of 9.6, and a
receivables turnover of 8.4.
a. How many days are in the cash cycle?
b. How many days are in the operating cycle?

Compute the Accounts Payable Period based on the following information:
ABC Products provides the following information.
Average Accounts Payable Balance is as follows: \$800,000
Annual Cost of Goods sold is as follows: \$9,000,000
Assume 365 days.
Compute the Accounts Payable period.

Compute the Operating Cycle based on the following information:
ABC Products provides the following information.
Average Collection Period 45 days
Accounts Payable Period 45 days
Average age of inventory 60 days
Compute operating cycle

Consider the following financial statement information for ABC Corporation.
Assume all sales are on credit.
a. How long is the cash cycle?
b. How long is the operating cycle?

Financial Management Quiz

The ABC Corporation has the following estimated quarterly sales for next year.
The average collection period is 30 days. Purchases are equal to 64 percent of the following
quarter’s sales. Suppliers are normally paid in 60 days. Determine the
a. Cash received from customers in Quarter 2
b. Ending Accounts Receivables Balance in Quarter 2
c. Cash paid to suppliers in Quarter 2
d. Ending Accounts Payable Balance in Quarter 2
e. Cash received from customers in Quarter 3
f. Ending Accounts Receivables Balance in Quarter 3
g. Cash paid to suppliers in Quarter 3
h. Ending Accounts Payable Balance in Quarter 3

Solve next four questions based on the following information:
Month Sales Month Sales
Jan \$15,306 July \$21,083
Feb \$15222 Aug \$25,000
Mar \$20,121 Sept \$25,400
Apr \$22,400 Oct \$18,950
May \$19,220 Nov \$19,220
June \$20,212 Dec \$19,088
The company has estimated expenses as follows:
General and Administrative Expenses per month: \$5,500
Material Purchases (are paid in the month following the purchase): 11% of sales
Interest Expense per month: \$250
Rent expenses per quarter starting March: \$950
Sales are collected as follows:
In the month of sales: 20%
In the next month: 5%
After 2 months: 30%
After 3 months: Remaining Balance

Find the cash outflows for February

Calculate the cash outflows for June

Calculate the collection from sales for December

Calculate the collection from sales for June

Financial Management Quiz

The actual sales and purchases for White Inc. for September and October 2006, along
with its forecast sales and purchases for the November 2006 through April 2007, follow.
Year Month Sales Purchases
2006 September \$310,000 \$220,000
2006 October 350,000 250,000
2006 November 270,000 240,000
2006 December 260,000 200,000
2007 January 240,000 180,000
2007 February 280,000 210,000
2007 March 300,000 200,000
2007 April 350,000 190,000

The firm makes 30 percent of all sales for cash and collects 35 percent of its sales in each of the two months following the sale. Other cash inflows are expected to be \$22,000 in September and April, \$25,000 in January and March, and \$37,000 in February. The firm pays cash for 20 percent of its purchases. It pays for 40 percent of its purchases in the following month and for 40 percent of its purchases two months later.

Wages and salaries amount to 15 percent of the preceding month’s sales. Lease expenses of \$30,000 per month must be paid. Interest payments of \$20,000 are due in
January and April. A principal payment of \$50,000 is also due in April. The firm pays cash dividend of \$30,000 in January and April. Taxes of \$120,000 are due in April. The firm also intends to make a \$55,000 cash purchase of fixed assets in December.

Assuming that the firm has a cash balance of \$25,000 at the beginning of November and its desired minimum cash balance is \$25,000, prepare a cash budget for November through April and determine the cash surplus/deficit for each month.

Financial Management Quiz

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