Which one of the following statements concerning net working capital is correct?

Which of the following are included in current liabilities? I. note payable to a supplier in eight months II. amount due from a customer next month III. account payable to a supplier that is due next week IV. loan payable to the bank in fourteen months    A.  I and III only B.  II and III only C.  I, II, and III only D.  I, III, and IV only E.  I, II, III, and IV Refer to section 2.1

17.	Which one of the following will increase the value of a firm's net working capital?    A.  using cash to pay a supplier B.  depreciating an asset C.  collecting an accounts receivable D.  purchasing inventory on credit E.  selling inventory at a profit Refer to section 2.1

18.

Which one of the following statements concerning net working capital is correct?    A.  Net working capital increases when inventory is purchased with cash. B.  Net working capital must be a positive value. C.  Total assets must increase if net working capital increases. D.  A decrease in the cash balance may or may not decrease net working capital. E.  Net working capital is the amount of cash a firm currently has available for spending. Refer to section 2.1

19.

Which one of the following statements concerning net working capital is correct?    A.  The lower the value of net working capital the greater the ability of a firm to meet its current obligations. B.  An increase in net working capital must also increase current assets. C.  Net working capital increases when inventory is sold for cash at a profit. D.  Firms with equal amounts of net working capital are also equally liquid. E.  Net working capital is a part of the operating cash flow. Refer to section 2.1

20.	Which one of the following accounts is the most liquid?    A.  inventory B.  building C.  accounts receivable D.  equipment E.  land Refer to section 2.1

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels

When utilizing the percentage of sales approach, managers: I. estimate company sales based on a desired level of net income and the current profit margin. II. consider only those assets that vary directly with sales. III. consider the current production capacity level. IV. can project both net income and net cash flows.    A.  I and II only B.  II and III only C.  III and IV only D.  I, III, and IV only E.  II, III, and IV only

17.

Which one of the following is correct in relation to pro forma statements?    A.  Fixed assets must increase if sales are projected to increase. B.  Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity. C.  The addition to retained earnings is equal to net income plus dividends paid. D.  Long-term debt varies directly with sales when a firm is currently operating at maximum capacity. E.  Inventory changes are directly proportional to sales changes.

18.

When constructing a pro forma statement, net working capital generally:    A.  remains fixed. B.  varies only if the firm is currently producing at full capacity. C.  varies only if the firm maintains a fixed debt-equity ratio. D.  varies only if the firm is producing at less than full capacity. E.  varies proportionally with sales.

19.

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels. Given this, you can safely assume that the firm:    A.  is projected to grow at the internal rate of growth. B.  is projected to grow at the sustainable rate of growth. C.  currently has excess capacity. D.  is currently operating at full capacity. E.  retains all of its net income.

Which one of the following is a project cash inflow? Ignore any tax effects.

Changes in the net working capital requirements:    A.  can affect the cash flows of a project every year of the project's life. B.  only affect the initial cash flows of a project. C.  only affect the cash flow at time zero and the final year of a project. D.  are generally excluded from project analysis due to their irrelevance to the total project. E.  reflect only the changes in the current asset accounts. Refer to section 10.4

22.	Which one of the following is a project cash inflow? Ignore any tax effects.    A.  decrease in accounts payable B.  increase in inventory C.  decrease in accounts receivable D.  depreciation expense based on MACRS E.  equipment acquisition Refer to section 10.4

23.

Net working capital:    A.  can be ignored in project analysis because any expenditure is normally recouped at the end of the project. B.  requirements, such as an increase in accounts receivable, create a cash inflow at the beginning of a project. C.  is rarely affected when a new product is introduced. D.  can create either a cash inflow or a cash outflow at time zero of a project. E.  is the only expenditure where at least a partial recovery can be made at the end of a project. Refer to section 10.4

24.

The operating cash flow of a cost cutting project:    A.  is equal to the depreciation tax shield. B.  is equal to zero because there is no incremental sales. C.  can only be analyzed by projecting the sales and costs for a firm's entire operations. D.  includes any changes that occur in the current accounts. E.  can be positive even though there are no sales. Refer to section 10.6

Rose's Gift Shop borrows money on a short-term basis by pledging its inventory as collateral. This is an example of a(n):

Rose's Gift Shop borrows money on a short-term basis by pledging its inventory as collateral. This is an example of a(n):    A.  debenture. B.  line of credit. C.  banker's acceptance. D.  working loan. E.  inventory loan. Refer to section 18.5

14.	Which one of the following increases cash?    A.  granting credit to a customer B.  purchasing new machinery C.  making a payment on a bank loan D.  purchasing inventory E.  accepting credit from a supplier Refer to section 18.1

15.	Which of the following are uses of cash? I. collecting a receivable II. increasing inventory III. obtaining a bank loan IV. paying a supplier for previous purchases    A.  I and III only B.  II and IV only C.  I and II only D.  I, II, and IV only E.  II, III, and IV only Refer to section 18.1

16.

Which one of the following will increase net working capital? Assume the current ratio is greater than 1.0.    A.  paying a supplier for a previous purchase B.  paying off a long-term debt C.  selling inventory at cost D.  purchasing inventory on credit E.  selling inventory at a profit on credit Refer to section 18.1