Question Details

41. Which of the following are frequently used as sources of information when trying to ascertain the creditworthiness of a customer?
I. payment history with similar firms
II. credit reports
III. financial statements
IV. information provided by a bank 
A. I and III only
B. II and IV only
C. I and II only
D. I, II, and III only
E. I, II, III, and IV

42. When evaluating the creditworthiness of a customer, the term character refers to the: 
A. nature of the cash flows of the customer's business.
B. customer's financial resources.
C. types of assets the customer wants to pledge as collateral.
D. customer's willingness to pay bills in a timely fashion.
E. nature of the customer's line of work.

43. Which one of the five Cs of credit refers to a firm's financial reserves? 
A. character
B. capacity
C. collateral
D. conditions
E. capital

44. Which one of the five Cs of credit refers to the general economic situation in the customer's line of business? 
A. capacity
B. character
C. conditions
D. capital
E. collateral

45. Which one of the following statements is correct? 
A. An aging schedule helps identify those customers who are the most delinquent.
B. The percentage of total receivables that falls within a certain time period on an aging schedule will remain constant over time even if the firm has seasonal sales.
C. Normally firms call their delinquent customers prior to sending them a past due letter.
D. A constant average collection period over a period of time is cause for concern.
E. It is common practice when a customer files for bankruptcy to sell that customer's receivable at face value.

46. Which one of the following inventory items is probably the least liquid? 
A. plywood held in inventory by a home builder
B. a wheel barrow held in inventory by a garden center
C. a partially assembled interior for a new vehicle
D. a set of tires owned by an automobile manufacturer
E. a toy owned by a retail toy store

47. Which one of the following inventory items is probably the most liquid? 
A. a custom made set of kitchen cabinets
B. metal cabinets for dishwashers
C. wheat stored in a grain silo
D. a customized drilling press
E. a partially built modular home

48. Which one of the following inventory-related costs is considered a shortage cost? 
A. storage costs
B. insurance cost
C. cost of safety reserves
D. obsolescence cost
E. opportunity cost of capital used for inventory purchases

49. The ABC approach to inventory management is based on the concept that: 
A. inventory should arrive just in time to be used.
B. the inventory period should be constant for all inventory items.
C. basic inventory items that are essential to production and also inexpensive should be ordered in small quantities only.
D. a small percentage of the inventory items probably represents a large percentage of the inventory cost.
E. one-third of a year's inventory need should be on hand, another third should be on order, and the last third should not be ordered yet.

50. The EOQ model is designed to determine how much: 
A. total inventory a firm needs in any one year.
B. total inventory costs will be for any one given year.
C. inventory should be purchased at a time.
D. inventory will be sold per day.
E. a firm loses in sales per day when an inventory item is depleted.