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Lev
Lev, Tax Preparer
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Experience:  Personal Investment, Tax Preparation
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7) We expect that we can receive annual incremental income

Resolved Question:

7) We expect that we can receive annual incremental income after taxes of $15,000 which includes an adjustment for uncollectible accounts. What is the maximum commitment to A/R we should be willing to assume if our firm's minimum required after-tax return is 12%?
     A.

$168,000
     B.

$180,000
     C.

$125,000
     D.

$18,000


8) Assuming that we can earn a 13.5% return on accounts receivable, which of the following actions to finance an increase in our accounts receivable balance would be optimal?
     A.

an increase in bank loans that would cost us 11.5%.
     B.

an increase in accounts payable that would cost our firm 15%.
     C.

a decrease in inventories which are earning a 17.6% return.
     D.

a reduction in marketable securities which are earning a return of 14.2%.

5) One of the first considerations in cash management is
     A.

profitability.
     B.

to put any excess cash into accounts receivable.
     C.

synchronization of cash inflows and cash outflows.
     D.

to have as much cash as possible on hand.


6) Cash flow does not rely on which of the following?
     A.

the speed at which suppliers and creditors process checks
     B.

the efficiency of the banking system
     C.

the monetary policy of the Federal Reserve
     D.

the payment patterns of customers
Submitted: 7 years ago.
Category: Finance
Expert:  Lev replied 7 years ago.

5. D. to have as much cash as possible on hand.

6. C. the monetary policy of the Federal Reserve

7. C. $125,000

8. A. an increase in bank loans that would cost us 11.5%.

 

Let me know if you need any help.

 

Customer: replied 7 years ago.

Could you please explain how you arrive at 125,000

 

#5 should have been cash flow in and out.

Expert:  Lev replied 7 years ago.

125,000*0,12=15,0000

 

#5 - the question was about "one of the first considerations"

Hope that helps.

 

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