Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)

1
When credit is granted to another firm, this gives rise to:
A)An accounts receivable and is called a consumer credit
B)A credit due and is called an installment note
C)An accounts receivable and is called trade credit
D)A trade agreement and is called an installment note
2
Supposing you purchase goods on terms of 10/20, net 60. Taking compounding into account, what annual rate of interest is implied by the cash discount? (Assume a year has 365 days.)
A)91%
B)139%
C)250%
D)161%
3
The due date for a company with terms of 3/10 net 60 is:
A)50 days
B)60 days
C)10 days
D)57 days
4
Which of the following statements is true?
A)Bank acceptances are seldom used in overseas trade.
B)A time draft is another name for a sight draft.
C)An irrevocable letter of credit ensures that funds are available to pay the bill.
D)Weak customers often default on commercial drafts.
5
Companies frequently use information from the following sources when conducting their credit analysis except:
A)Financial statement supplied by the customer
B)Payment history supplied by other firms
C)Payment history supplied by banks
D)All of the options are sources of information
6
Exporters who require guarantee of payment will ask for:
A)Trade acceptances
B)Bankers' acceptances
C)An irrevocable letter of credit
D)None of these options
7
A customer has ordered goods with a value of $800. The production cost is $600. Under what conditions should you extend credit if there is no possibility of repeat orders?
A)If the probability of payment exceeds 0.67
B)If the probability of payment exceeds 0.75
C)If the probability of payment exceeds 0.80
D)If the probability of payment exceeds 0.90
8
Which of the following statements is true?
A)New companies must be prepared to incur more bad debts than established businesses as part of the cost of building up a good customers list.
B)To ensure fairness, companies should give each customer the same type of credit analysis.
C)Companies with high profit margins need to be particularly careful about extending credit to high-risk customers.
D)All of these options are true.
9
Zebra Corp. is currently experiencing a bad debt ratio of 4%. Terry is convinced that, with looser credit controls, this ratio will increase to 8%; however, she expects sales to increase by 10% as a result. The cost of goods sold is 80% of the selling price. Per $100 of current sales, what is Terry's expected profit under the proposed credit standards?
A)$26.0
B)$15.4
C)$13.2
D)$25.6
10
The average collection period for a firm that offers a discount must:
A)Be equal to the net period if customers take the discount or pay on time.
B)Be greater than the net period if customers take the discount or pay on time.
C)Be less than the net period if customers take the discount or pay on time.
D)Be unchanged because the collection period is unaffected by the discount.
11
Factoring refers to:
A)Determining the aging schedule of the firm's accounts receivable.
B)The sale of a firm's accounts receivable to another firm.
C)The determination of the average collection period.
D)Scoring a customer based on the five Cs of credit.
12
Which of the following is not a way to receive and send money electronically?
A)Direct payments
B)Accounts payable
C)Direct deposits
D)Wire transfers
13
Which is true about a repo?
A)It is effectively a secured loan typically made to a government security dealer
B)It frequently lasts only overnight
C)It offers more liquidity than other domestic money-market investments
D)All of these options
14
Optimal inventory policy offsets which two costs?
A)Holding and shipping
B)Holding and ordering
C)Order costs and carrying
D)Holding and carrying
15
Why does it make sense for a company to extend credit to a customer if the bank is unwilling to do so?
A)You may have more information than the bank does about a customer's business.
B)You may lose profitable future sales if the customer goes out of business.
C)You may need more short-term funds now.
D)Both A and B.





To learn more about the book this website supports, please visit its Information Center.
(c)2014 McGraw-Hill Education Europe
Any use is subject to the Terms of Use and Privacy Notice.
McGraw-Hill Education Europe is one of the many fine businesses of The McGraw-Hill Companies.


Brealey Principles GE 11eOnline Learning Center

Home > Chapter 30 > Multiple Choice Quiz