How can a company improve its cash conversion cycle?

A) Grant customers discounts for paying in cash

B) Buy inventory in bulk to save on unit cost
C) Pay suppliers faster
D) Reduce operating expenses
E) Launch a marketing campaign to boost sales
2.
True or False: In the new paradigm of working capital management,
companies believe that holding excess inventory adds value to
customers.
A) True
B) False
3.
What are the components of the short term operating cycle?
A) Days sales outstanding, Days payables outstanding
B) Days sales outstanding, Days sales in inventory, Days
payables outstanding
C) Days sales outstanding, Bad debt expense, Days payables
outstanding
D) Days sales outstanding, Days sales in inventory
E) Days sales outstanding, Days sales in inventory, Fixed asset
turnover
4.
Which of the following companies is well known for its Cash
Conversion Cycle?
A) Caterpillar
B) Exxon
C) Dell
D) Nike
E) Adidas
5.
Dell's operating cycle is less than Boeing's.
A) True
B) False
6.
True or False: Under the new paradigm of working capital, companies
try to have as much working capital as possible.

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 A) True
B) False
7.
Which company has the largest R&D budget?
A) Apple
B) Dell
C) Samsung
D) Volkswagen
E) Microsoft
8.
The difference between the operating cycle and the cash conversion
cycle is that:
A) The cash conversion cycle accounts for supplier financing
B) The operating cycle subtracts accounts for supplier financing
C) The operating cycle is shorter than the cash conversion cycle
D) The operating cycle does not consider inventory
E) There is no difference
9.
Which of the following is NOT true regarding the capital budgeting
process?
A) Evaluation of discounted cash flows is necessary
B) Cash flows are negative at first
C) Negative NPV will always occur when initial cash flows are
negative
D) Companies should only invest in projects where the Return on
Investment>Cost of Capital
E) Strategic planning is usually the first step
10.
True or False: Days Sales Outstanding represents the time frame
from when a company purchases raw materials to when it sells
finished goods.
A) True
B) False
11.
Companies will only invest in capital expenditures if the cash flows of
a project are positive within less than a year.

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 A) True
B) False
12.
Which Company would you expect to have the shortest operating
cycle?
A) Boeing
B) Nike
C) John Deere
D) Caterpillar
E) Panera Bread
13.
True or False: Days Sales Outstanding represents the time frame
from when a company makes a sale to when it collects its Accounts
Receivable.
A) True
B) False
14.
True or False: Shortage costs increase as current assets increase.
A) True
B) False
15.
The Operating Cycle refers to:
A) The number of days a company makes its sale to when they
get paid
B) The number of days when a company buys its inventory to the
day it pays its suppliers
C) The number of days when a company buys its inventory to
the day it is paid
D) The number of days from when it makes its sale to when it is
paid
E) The number of days when a company buys its inventory to the
day it makes its sale
16.
True or False: A positive cash conversion cycle is preferable to a
negative cash conversion cycle.
A) True
B) False

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 17.
Given the following, calculate the short term operating cycle of
Company A: Days sales outstanding – 30 days Days sales in
inventory – 40 days Days payables outstanding – 30 Bad Debt
Expense (%) – 2.5%.
A) 40 days
B) 68 days
C) 70 days
D) 100 days
E) 98 days
18.
What is the Cash Conversion Cycle?
A) The number of days it takes for the customer to pay the
company
B) The number of days from when the company buys inventory to
when the customer pays company
C) The number of days from the sale to when the customer pays
the company
D) The number of days from when the company buys inventory to
the date of the sale
E) The number of days the customer pays the supplier to
when the customer pays the company
19.
Which is true of Strategic Financial Management?
A) Capital Budgeting involves short term assets & liabilities
B) Decisions about debt & equity financing are referred to as
capital budgeting decisions
C) Capital Structure is primarily evaluated from the income
statement
D) Working Capital is a long term investment decision
E) Short term assets are a component of working capital
20.
The level of a company's capital expenditures tend to follow the trend
of the economy over time.
A) True
B) False

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 From a finance perspective, which costs associated with working
capital are most relevant?
A) Bad credit
B) Cost of Capital invested
C) Insurance
D) Spoilage & Obsolescence
E) Warehousing

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