This document is a 65 point exam on inventory management and short-term financing consisting of multiple choice and fill-in-the-blank questions. Part I contains fill-in-the-blank questions testing concepts like economic order quantity, carrying costs, ordering costs, reorder point, and lead time. Part II contains 28 multiple choice questions testing topics such as the five C's of credit, sources of short-term financing, trade discounts, and inventory costing methods. The exam evaluates students' understanding of key theories and calculations for inventory management and short-term financial decision making.
This document is a 65 point exam on inventory management and short-term financing consisting of multiple choice and fill-in-the-blank questions. Part I contains fill-in-the-blank questions testing concepts like economic order quantity, carrying costs, ordering costs, reorder point, and lead time. Part II contains 28 multiple choice questions testing topics such as the five C's of credit, sources of short-term financing, trade discounts, and inventory costing methods. The exam evaluates students' understanding of key theories and calculations for inventory management and short-term financial decision making.
This document is a 65 point exam on inventory management and short-term financing consisting of multiple choice and fill-in-the-blank questions. Part I contains fill-in-the-blank questions testing concepts like economic order quantity, carrying costs, ordering costs, reorder point, and lead time. Part II contains 28 multiple choice questions testing topics such as the five C's of credit, sources of short-term financing, trade discounts, and inventory costing methods. The exam evaluates students' understanding of key theories and calculations for inventory management and short-term financial decision making.
This document is a 65 point exam on inventory management and short-term financing consisting of multiple choice and fill-in-the-blank questions. Part I contains fill-in-the-blank questions testing concepts like economic order quantity, carrying costs, ordering costs, reorder point, and lead time. Part II contains 28 multiple choice questions testing topics such as the five C's of credit, sources of short-term financing, trade discounts, and inventory costing methods. The exam evaluates students' understanding of key theories and calculations for inventory management and short-term financial decision making.
CLASS TIME & SCHEDULE: ________________________ P3 – EXAM 65 POINTS
Inventory Management, Short-Term Financing
PART I. Identification – Theory (2 points each)
______________________1. It is the point where the total ordering costs equal the total carrying cost. ______________________2. It involves deciding the correct quantity and quality, as well as the right time to order, in order to reduce costs while meeting sales demand. ______________________3. This is computed by multiplying the number of orders with the ordering cost per order. ______________________4. It is the total number of units of inventory for the period multiplied by the carrying cost per unit. ______________________5. It is the level of inventory that should be placed at to replenish the inventory. ______________________6. The time it usually takes to obtain product delivery after placing the order. ______________________7. These are expenses arising from the company's inability toward contingencies such as inaccurate consumption estimate, production delays, receipts of faulty goods and the like. ______________________8. This is the minimum amount of inventory set for protecting the company from contingencies such as inaccurate use figures, delays in production, receipts of faulty goods and the like. ______________________9. It is an inventory system where goods are only completed as ordered by customers and materials are delivered just in time for manufacture. _____________________10. This is primarily intended to sustain operations involving short-term investment (or current assets). _____________________11. It is the cost of borrowing. _____________________12. It is a deduction in the invoice price of the merchandise. _____________________13. These are expenses already incurred but not yet paid off by the company. Examples include salaries and wages, taxes and interest. _____________________14. An arrangement requiring a borrower to keep a certain percentage of the amount borrowed in the borrower's current account. _____________________15. It is the amount of loan to be paid on maturity date.
Part II. Multiple Choice – Theory (1 point each)
___________16. All, except for one, is not included in the five C’s of credit? A. Character C. Capital B. Collections D. Collateral
___________17. One of the following information is not a source of short-term credit.
A. Term credit C. Deferred income B. Accruals D. Common stock
___________18. I. Interest rate under short-term financing is fixed for a period of one year. II. Current liabilities are obligations payable beyond one year. A. both statements are true C. only statement I is true B. only statement II is true D. both statements are false
___________19. I. Short-term financing is easier to arrange than long-term financing.
II. Under the terms of credit, the length of the credit period and any cash discounts offered are both included. A. both statements are true C. only statement I is true B. only statement II is true D. both statements are false
___________20. It is the average length of time required to convert a firm’s receivables into cash. A. Days sales outstanding C. Receivables collection period B. Payables deferral period D. Inventory conversion period
___________21. I. If a firm This study source was downloaded anticipates stretching by 100000855738392 accountsonpayable, from CourseHero.com 10-27-2022its cost of 08:51:34 giving GMT -05:00up a cash discount is increased. II. A firm should take the cash discount if the firm’s cost of borrowing from the bank is greater than the cost of giving up a cash discount. https://www.coursehero.com/file/173677665/FIN004-P3-Exam-to-printdocx/ A. both statements are true C. only statement II is true B. only statement I is true D. both statements are false
___________22. I. The effective interest rate on a bank loan depends on whether interest is paid when the loan matures or in advance. II. A discount loan is a loan on which interest is paid in advance by deducting it from the loan so that the borrower actually receives less money than is requested. A. both statements are true C. only statement I is true B. only statement II is true D. both statements are false
___________23. I. The effective interest rate for a discount loan is greater than the loan’s stated interest rate. II. The outright sale of accounts receivable at a discount in order to obtain funds is called pledging accounts receivable. A. both statements are true C. only statement I is true B. both statements are false D. only statement II is true
___________24. I. Accruals are a source of short-term financing.
II. A firm should take the cash discount if the firm’s cost of borrowing from the bank is greater than the cost of giving up a cash discount. A. both statements are true C. only statement I is true B. both statements are false D. only statement II is true
___________25. It is a deduction in the purchase price to serve as an incentive for prompt payment A. trade discount C. credit term B. cash discount D. discount period
___________26. It is the cost of borrowing.
A. interest C. maturity value B. principal D. compensating balance
___________27. This is a deal between two parties: the buyer and the seller. A. trade credit C. management contract B. loan agreement D. none of the above
___________28. When factoring accounts receivables, the factor is the:
A. The method of determining how much money is lent to the firm. B. The financial institution that buys the accounts receivable. C. The percent deduction in payment to the firm. D. Negotiated accounts receivable account.
___________29. Which of the following provides a spontaneous source of financing for a firm? A. Accounts payable C. Accounts receivable B. Mortgage bonds D. Debentures
___________30. I. Under accrual, expenses are recorded immediately regardless if paid or not. II. The two main types of inventory cost relevant to inventory-decision making are carrying costs and ordering costs. A. both statements are true C. only statement I is true B. both statements are false D. only statement II is true
___________31. Following are costs related to carrying inventory, except
A. space used C. personal property tax B. fire & theft insurance D. unloading and inspection cost
___________32. In inventory management, the problem of avoiding excessive investment in inventories and at the same time avoiding inventory shortages can be solved by applying quantitative techniques known as A. Payback analysis C. Economic order quantity model B. Probability analysis D. High-low point method
___________33. The selling price of the product is relatively high and the purchase cost of the product is relatively low. In this situation: A. Management must increase the price to cover the cost of carrying higher inventory. This study source was downloaded by 100000855738392 from CourseHero.com on 10-27-2022 08:51:34 GMT -05:00 B. The EOQ model will indicate frequent large orders. C. The EOQ of the product is affected by the selling price. https://www.coursehero.com/file/173677665/FIN004-P3-Exam-to-printdocx/ D. The selling price has nothing to do with the EOQ of the product. ___________34. An increase in inventory holding costs will A. Have no effect on the economic order quantity. B. Increase the economic order quantity. C. Decrease the number of orders issued per year. D. Decrease the economic order quantity.
___________35. The ordering costs associated with inventory management include
A. Insurance costs, purchasing costs, shipping costs, and spoilage. B. Obsolescence, setup costs, quantity discounts lost, and storage costs. C. Purchasing costs, shipping costs, setup costs, and quantity discounts lost. D. Shipping costs, obsolescence, setup costs, and capital invested.
Part III. Multiple Choice – Computation (3 points each)
___________36. First Bank just approved a loan application for Fandom Company. The terms of the loan include a compensating balance of 10% of the approved loan amount of P75,000 and an interest rate on the loan of 9%. Compute the effective interest rate. A. 10% C. 11% B. 12% D. 13%
___________37. Alcaraz Co. is contemplating a change in its trade receivable payment policy to free up cash to avoid bank financing to sustain operations. The company proposes to forego the discount on the supplier's credit term of 2/10, n/30. On a 365-day year, what is the nominal cost of the credit should the proposal gets approved? A. 37.24% C. 36.25% B. 38.22% D. 39.19%
For questions 38-40, please refer to the following problem:
A company predicts that 3,200 units of materials will be used during the year. The expected daily usage is 15 units and delivery is expected after 10 days of placing the order. The purchasing manager is told that a safety stock of 200 units should be maintained. The cost of materials is P4 per unit. It is estimated that it will cost P25 to place each order. The annual carrying cost is P1 per unit.
____________38. What is the Reorder Point?
A. 250 units C. 350 units B. 450 units D. 550 uits
____________39. Compute the EOQ.
A. 200 units C. 300 units B. 400 units D. 500 units
____________40. What is the total inventory cost (total ordering cost + total carrying cost)? A. P 200.00 C. P 300.00 B. P 400.00 D. P 500.00
END of P3 EXAM. Good Luck!!!
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