Pop Quiz 1

Question 1

Which one of the following questions is a working capital management decision?

A) Should the company issue new shares of stock or borrow money?
B) Should the company update or replace its older equipment?
C) How much inventory should be on hand for immediate sale?
D) Should the company close one of its current stores?
E) How much should the company borrow to buy a new building?

Answer 1

C) How much inventory should be on hand for immediate sale?

Question 2

Which one of the following terms is defined as the management of a firm’s long-term investments?

A) Working capital management
B) Financial allocation
C) Agency cost analysis
D) Capital budgeting
E) Capital structure

Answer 2

D) Capital budgeting

Question 3

Twist Corp. has a current accounts receivable balance of $397,615. Credit sales for the year just ended were $2,953,600. Calculate the Average Collection Period: Formula = 365/ Receivables Turnover

A) 49.14 days
B) 39.14 days
C) 29.14 days
D) 7.43 days
E) 14.49 days

Answer 3

A) 49.14 days

Question 4

SDJ, Inc., has net working capital of $1,590, current liabilities of $3,400, and inventory of $1,845. What is the current ratio? Hint: Use NWC formula to figure out Current Assets)

A)1.37
B)1.27
C) 3.37
D) 1.47
E) 2.47

Answer 4

D) 1.47

Question 5

RBC, Inc., has sales of $10,000 and $8000 in Net Fixed Asset and $1000 in current assets , debt/equity ratio of 1.25 and a$ 750 in profits. Calculate Return on Equity using Dupont identity

ROE= Profit margin* Total Asset Turnover* Equity Multiplier

A) 9.39%
B) 18.75%
C) 21%
D) 12.03%
E) 93.75%

Answer 5

B) 18.75%