Question

1/

1. Trust receipt financing is probably the best-short term credit financing for County Shop,  a small-sized, general store that stocks a minimal level of basic supplies and offers gasoline to a rural community.

   True

   False

2. Capital expenditures are treated as a cash inflow on a cash budget.

   True

   False

3. You want to evaluate the impact of a change in credit policy for Valuland Corporation. The accounts receivable turnover rate for the firm has gone from an average of 14.1 times to 15.6 times per year. How has this change affected the firm's accounts receivable period?

   		Decrease of 1.98 days
   		Increase of 3.08 days
   		Decrease of 3.28 days
   		Increase of 2.49 days
   		Decrease of 2.49 days

Answer 1

Answer 1 :- False

Reason :- The statement written above means Blanket inventory lien & not Trust receipt financing

Answer 2 :- False

Reason :- Cash expenditure is cash outflow in cash budget.

Answer 3 :- Decrease of 2.49 days

Reason :- Accounts receivable period per day = 365 / Accounts receivable turnover

in case of turnover is 14.10 days then accounts receivable per day = 365 / 14.10 ==> 25.89

in case of turnover of 15.60 days then accounts receivable per day = 365 / 15.6 ==> 23.40

So decrease is 25.89 - 23.40 = 2.49 days