Q&A Hero

Q: Krackle Korn Inc. had credit sales of $3,500,000 last year and its days sales outstanding was DSO = 35 days. What was its average receivables balance, based on a 365-day year?a. $335,616b. $352,397c. $370,017d. $388,518e. $407,944

Q: A software program that allows access to a system without going through the normal logon procedures is called a a. logic bomb b. Trojan horse c. worm d. back door

Q: A software program that replicates itself in areas of idle memory until the system fails is called a a. Trojan horse b. worm c. logic bomb d. none of the above

Q: Which of the following statements is CORRECT? a. If cash inflows from collections occur in equal daily amounts but most payments must be made on the 10th of each month, then a regular monthly cash budget will be misleading. The problem can be corrected by using a daily cash budget. b. Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales. c. If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10 net 30 to net 60. d. If a firm sells on terms of net 90, and if its sales are highly seasonal, with 80% of its sales in September, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365) would probably be lower in October than in August. e. Depreciation is included in the estimate of cash flows (Cash flow = Net income = Depreciation); hence depreciation is set forth on a separate line in the cash budget.

Q: Which of the following is considered an unintentional threat to the integrity of the operating system? a. a hacker gaining access to the system because of a security flaw b. a hardware flaw that causes the system to crash c. a virus that formats the hard drive d. the systems programmer accessing individual user files

Q: Which of the following statements is CORRECT? a. If a firm that sells on terms of net 30 changes its policy to 2/10 net 30, and if no change in sales volume occurs, then the firm's DSO will probably increase. b. If a firm sells on terms of 2/10 net 30, and its DSO is 30 days, then the firm probably has some past-due accounts. c. If a firm sells on terms of net 60, and if its sales are highly seasonal, with a sharp peak in December, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365) would probably be lower in January than in July. d. If a firm changed the credit terms offered to its customers from 2/10 net 30 to 2/10 net 60, then its sales should increase, and this should lead to an increase in sales per day, and that should lead to a decrease in the DSO. e. Other things held constant, the higher a firm's days sales outstanding (DSO), the better its credit department.

Q: Which of the following statements is CORRECT? a. In managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its DSO) sufficiently. b. Because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales. c. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio. d. Other things held constant, if a firm can shorten its DSO, this will lead to a higher current ratio. e. A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. Such a firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to finance the 10% growth rate.

Q: The operating system performs all of the following tasks except a. translates third-generation languages into machine language b. assigns memory to applications c. authorizes user access d. schedules job processing

Q: Which of the following is NOT commonly regarded as being a credit policy variable? a. Collection policy. b. Credit standards. c. Cash discounts. d. Payments deferral period. e. Credit period.

Q: HTML tags are customized to delimit attributes, the content of which can be read and processed by computer applications.

Q: A pingis used to test the state of network congestion and determine whether a particular host computer is connected and available on the network.

Q: If a firm sells on terms of 2/10 net 30 days, and its DSO is 28 days, then the fact that the 28-day DSO is less than the 30-day credit period tells us that the credit department is functioning efficiently and there are no past-due accounts. a. True b. False

Q: Because money has time value, a cash sale is always more profitable than a credit sale. a. True b. False

Q: The more individuals that need to exchange encrypted data, the greater the chance that the key will become known to an intruder. To overcome this problem, private key encryption was devised.

Q: Polling is one technique used to control data collisions.

Q: A firm's collection policy, i.e., the procedures it follows to collect accounts receivable, plays an important role in keeping its average collection period short, although too strict a collection policy can reduce profits due to lost sales. a. True b. False

Q: In a hierarchical topology, network nodes communicate with each other via a central host computer.

Q: For a zero-growth firm, it is possible to increase the percentage of sales that are made on credit and still keep accounts receivable at their current level, provided the firm can shorten the length of its collection period sufficiently. a. True b. False

Q: A smurf attack involves three participants: a zombie, an intermediary, and the victim.

Q: Dimon Products' sales are expected to be $5 million this year, with 90% on credit and 10% for cash. Sales are expected to grow at a stable, steady rate of 10% annually in the future. Dimon's accounts receivable balance will remain constant at the current level, because the 10% cash sales can be used to support the 10% growth rate, other things held constant. a. True b. False

Q: Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio. a. True b. False

Q: A digital signature is a digital copy of the sender's actual signature that cannot be forged.

Q: Suppose a firm changes its credit policy from 2/10 net 30 to 3/10 net 30. The change is meant to meet competition, so no increase in sales is expected. The average accounts receivable balance will probably decline as a result of this change. a. True b. False

Q: A network topology is the physical arrangement of the components of the network.

Q: The bus topology connects the nodes in parallel.

Q: Not taking cash discounts is costly, and as a result, firms that do not take them are usually those that are performing poorly and have inadequate cash balances. a. True b. False

Q: Changes in a firm's collection policy can affect sales, working capital, and profits. a. True b. False

Q: Only two types of motivation drive DoS attacks: 1) to punish an organization with which the perpetrator had a grievance; and 2) to gain bragging rights for being able to do it.

Q: The client-server model can only be applied to ring and star topologies.

Q: The four primary elements in a firm's credit policy are (1) credit standards, (2) cashdiscounts offered, (3) credit period, and (4) collection policy. a. True b. False

Q: The aging schedule is a commonly used method for monitoring receivables. a. True b. False

Q: Because of network protocols, users of networks built by different manufacturers are able to communicate and share data.

Q: A factor that contributes to computer crime is the reluctance of many organizations to prosecute criminals for fear of negative publicity.

Q: If a firm has a large percentage of accounts over 30 days old, this is proof positive that its receivables manager is not doing a good job. a. True b. False

Q: The rules that make it possible for users of networks to communicate are called protocols.

Q: The average accounts receivable balance is a function of both the volume of credit sales and the days sales outstanding. a. True b. False

Q: Which of the following statements is most consistent with efficient inventory management? The firm has a a. low incidence of production schedule disruptions. b. below average total assets turnover ratio. c. relatively high current ratio. d. relatively low DSO. e. below average inventory turnover ratio.

Q: IP spoofing is a form of masquerading to gain unauthorized access to a Web server.

Q: The network paradox is that networks exist to provide user access to shared resources while one of its most important objectives is to control access.

Q: The twin goals of inventory management are (1) to ensure that the inventories needed to sustain operations are available, but (2) to hold the costs of ordering and carrying inventories to the lowest possible level. a. True b. False

Q: The overriding goal of inventory management is to ensure that the firm never suffers a stock-out, i.e., never runs out of an inventory item. a. True b. False

Q: To preserve audit trails in a computerized environment, transaction logs are permanent records of transactions.

Q: A firewall is a hardware partition designed to protect networks from power surges.

Q: Monar Inc.'s CFO would like to decrease its cash conversion cycle by 10 days (based on a 365 day year). The company carries average inventory of $750,000. Its annual sales are $10 million, its cost of goods sold is 75% of annual sales, and its average collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. The CFO believes he can reduce the average inventory to $647,260 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of the cash conversion cycle?a. $123,630b. $130,137c. $136,986d. $143,836e. $151,027

Q: Fontana Painting had the following data for the most recent year (in millions). The new CFO believes that the company could improve its working capital management sufficiently to bring its NWC and CCC up to the benchmark companies' level without affecting either sales or the costs of goods sold. Fontana finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year. If these changes had been made, by how much would the firm's pre-tax income have increased? Original Benchmark Data Related CCC CCCSales $100,000 Cost of goods sold $ 80,000 Inventory (ICP) $ 20,000 91.25 38.00Receivables (DSO) $ 16,000 58.40 20.00Payables (PDP) $ 5,000 22.81 30.00 126.84 28.00a. 1,901b. 2,092c. 2,301d. 2,531e. 2,784

Q: The audit trail for electronic data interchange transactions is stored on magnetic media.

Q: Electronic data interchange customers may be given access to the vendor's data files.

Q: Pascarella Inc. is revising its payables policy. It has annual sales of $50,735,000, an average inventory level of $15,012,000, and average accounts receivable of $10,008,000. The firm's cost of goods sold is 85% of sales. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level but inventory can be lowered by $1,946,000 and accounts receivable by $1,946,000. What will be the net change in the cash conversion cycle, assuming a 365-day year?a. -26.6 daysb. -29.5 daysc. -32.8 daysd. -36.4 dayse. -40.5 days

Q: Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 35 days. What effect would these policies have on the company's cash conversion cycle? Round to the nearest whole day.a. -26 daysb. -22 daysc. -18 daysd. -14 dayse. -11 days

Q: A value added network can detect and reject transactions by unauthorized trading partners.

Q: Electronic data interchange translation software interfaces with the sending firm and the value added network.

Q: Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered? Original RevisedAnnual sales: unchanged $110,000 $110,000Cost of goods sold: unchanged $80,000 $80,000Average inventory: lowered by $4,000 $20,000 $16,000Average receivables: lowered by $2,000 $16,000 $14,000Average payables: increased by $2,000 $10,000 $12,000Days in year 365 365a. 34.0b. 37.4c. 41.2d. 45.3e. 49.8

Q: The request-response technique should detect if a data communication transmission has been diverted.

Q: Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?Annual sales = $45,000Annual cost of goods sold = $30,000Inventory = $4,500Accounts receivable = $1,800Accounts payable = $2,500a. 28 daysb. 32 daysc. 35 daysd. 39 dayse. 43 days

Q: The message authentication code is calculated by the sender and the receiver of a data transmission.

Q: Frosty Corporation has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?Annual sales = $45,000Annual cost of goods sold = $31,500Inventory = $4,000Accounts receivable = $2,000Accounts payable = $2,400a. 25 daysb. 28 daysc. 31 daysd. 35 dayse. 38 days

Q: Marshall Inc. recently hired your consulting firm to improve the company's performance. It has been highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is the firm's present cash conversion cycle?Average inventory = $75,000Annual sales = $600,000Annual cost of goods sold = $360,000Average accounts receivable = $160,000Average accounts payable = $25,000a. 120.6 daysb. 126.9 daysc. 133.6 daysd. 140.6 dayse. 148.0 days

Q: In a telecommunications environment, line errors can be detected by using an echo check.

Q: Audit trails in computerized systems are comprised of two types of audit logs: detailed logs of individual keystrokes and event-oriented logs.

Q: Data on Mertz Co. for the most recent year are shown below, along with the payables deferral period (PDP) for the firms against which it benchmarks. The firm's new CFO believes that the company could delay payments enough to increase its PDP to the benchmarks' average. If this were done, by how much would payables increase? Use a 365-day year.Cost of goods sold = $75,000Payables = $5,000Payables deferral period (PDP) = 24.33Benchmark payables deferral period = 30.00a. $764b. $849c. $943d. $1,048e. $1,164

Q: The most frequent victims of program viruses are microcomputers.

Q: Data on Liu Inc. for the most recent year are shown below, along with the inventory conversion period (ICP) of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to the benchmarks' average. If this were done, by how much would inventories decline? Use a 365-day year.Cost of goods sold = $85,000Inventory = $20,000Inventory conversion period (ICP) = 85.88Benchmark inventory conversion period (ICP) = 38.00a. $7,316b. $8,129c. $9,032d. $10,036e. $11,151

Q: Thornton Universal Sales' cost of goods sold (COGS) average $2,000,000 per month, and it keeps inventory equal to 50% of its monthly COGS on hand at all times. Using a 365-day year, what is its inventory conversion period?a. 11.7 daysb. 13.0 daysc. 14.4 daysd. 15.2 dayse. 16.7 days

Q: Operating system controls are of interest to system professionals but should not concern accountants and auditors.

Q: Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year.Sales $110,000Accounts receivable $16,000Days sales outstanding (DSO) 53.09Benchmark days sales outstanding (DSO) 20.00a. $8,078b. $8,975c. $9,973d. $10,970e. $12,067

Q: Viruses rarely attach themselves to executable files.

Q: Mark's Manufacturing's average age of accounts receivable is 45 days, the average age of accounts payable is 40 days, and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle?a. 63 daysb. 67 daysc. 70 daysd. 74 dayse. 78 days

Q: A worm is software program that replicates itself in areas of idle memory until the system fails.

Q: Whaley & Whaley has the following data. What is the firm's cash conversion cycle?Inventory conversion period = 41 daysAverage collection period = 31 daysPayables deferral period = 38 daysa. 31 daysb. 34 daysc. 37 daysd. 41 dayse. 45 days

Q: Computer viruses usually spread throughout the system before being detected.

Q: Fireside Inc. has the following data. What is the firm's cash conversion cycle?Inventory conversion period = 38 daysAverage collection period = 19 daysPayables deferral period = 20 daysa. 33 daysb. 37 daysc. 41 daysd. 45 dayse. 49 days

Q: A formal log-on procedure is the operating system's last line of defense against unauthorized access.

Q: Brothers Breads has the following data. What is the firm's cash conversion cycle?Inventory conversion period = 50 daysAverage collection period = 17 daysPayables deferral period = 25 daysa. 31 daysb. 34 daysc. 38 daysd. 42 dayse. 46 days

Q: Disguising message packets to look as if they came from another user and to gain access to the host's network is called spooling.

Q: Which of the following actions would be likely to shorten the cash conversion cycle? a. Change the credit terms offered to customers from 3/10 net 30 to 1/10 net 50. b. Begin to take cash discounts on inventory purchases; the terms are 2/10 net 30. c. Adopt a new manufacturing process that saves some labor costs but slows down the conversion of raw materials to finished goods from 10 days to 20 days. d. Change the credit terms offered to customers from 2/10 net 30 to 1/10 net 60. e. Adopt a new manufacturing process that speeds up the conversion of raw materials to finished goods from 20 days to 10 days.

Q: In a computerized environment, the audit trail log must be printed onto paper documents.

Q: Other things held constant, which of the following would tend to reduce the cash conversion cycle? a. Place larger orders for raw materials to take advantage of price breaks. b. Take all cash discounts that are offered. c. Continue to take all cash discounts that are offered and pay on the net date. d. Offer longer payment terms to customers. e. Carry a constant amount of receivables as sales decline.

Q: Which of the following disaster recovery techniques may be least optimal in the case of a disaster? a. empty shell b. mutual aid pact c. recovery operation center d. they are all equally beneficial

Q: Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle? a. Take steps to reduce the DSO. b. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales. c. Sell common stock to retire long-term bonds. d. Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock. e. Increase average inventory without increasing sales.

Q: Which of the following is NOT a control implication of distributed data processing? a. redundancy b. user satisfaction c. incompatibility d. lack of standards