Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 18, Problem 4CRCT
Cost of Current Assets [LO2] Loftis Manufacturing, Inc., has recently installed a just-in-time (JIT) inventory system. Describe the effect this is likely to have on the company’s carrying costs, shortage costs, and operating cycle.
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Inventory carrying costs:
O include the costs of generating memos, fax transmissions, etc. associated with placing an order with a supplier.
O generally increase in proportion to the average amount of inventory held.
are fixed regardless of the average size of the inventory.
are equal to the sum of total inventory costs and total ordering costs.
are at maximum when a firm's order is equal to optimal quantity.
Identify the correct statement from the following if, cóst of inventory is greater than its net releasable value?
The firm will not incur losses due to this situation.
There is higher demand for the inventory in the market.
Inventory value in the balance sheet shall decrease.
Inventory value in the balance sheet shall increase.
Penner LLC imported a packing machine from London. Penner LLC incurred the following costs:
Chapter 5 - IAS 16..pdf A
Chapter 4 - IAS 2 i.pdf
EN
In a period of rising costs, which inventory valuation method would a company likely choose if they want to have the highest possible amount of inventory reported in the balance sheet?
Multiple Choice
Weighted-average cost
Straight-line
FIFO
LIFO
Chapter 18 Solutions
Fundamentals of Corporate Finance
Ch. 18.1 - What is the difference between net working capital...Ch. 18.1 - Prob. 18.1BCQCh. 18.1 - List five potential sources of cash.Ch. 18.1 - Prob. 18.1DCQCh. 18.2 - Prob. 18.2ACQCh. 18.2 - Prob. 18.2BCQCh. 18.2 - Prob. 18.2CCQCh. 18.3 - What keeps the real world from being an ideal one...Ch. 18.3 - What considerations determine the optimal size of...Ch. 18.3 - Prob. 18.3CCQ
Ch. 18.4 - Prob. 18.4ACQCh. 18.4 - Prob. 18.4BCQCh. 18.5 - Prob. 18.5ACQCh. 18.5 - Describe two types of secured loans.Ch. 18.6 - Prob. 18.6ACQCh. 18.6 - In Table 18.6, what would happen to Fun Toys...Ch. 18 - Prob. 18.1CTFCh. 18 - A firm has an operating cycle of 64 days and a...Ch. 18 - Prob. 18.4CTFCh. 18 - Prob. 18.5CTFCh. 18 - Operating Cycle [LO1] What are some of the...Ch. 18 - Prob. 2CRCTCh. 18 - Prob. 3CRCTCh. 18 - Cost of Current Assets [LO2] Loftis Manufacturing,...Ch. 18 - Operating and Cash Cycles [LO1] Is it possible for...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Prob. 8CRCTCh. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Changes in the Cash Account [LO4] Indicate the...Ch. 18 - Prob. 2QPCh. 18 - Changes in the Operating Cycle [LO1] Indicate the...Ch. 18 - Prob. 4QPCh. 18 - Calculating Cash Collections [LO3] The Morning...Ch. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - Calculating Payments [LO3] Sedman, Corp., has...Ch. 18 - Calculating Payments [LO3] The Torrey Pine...Ch. 18 - Calculating Cash Collections [LO3] The following...Ch. 18 - Calculating the Cash Budget [LO3] Here are some...Ch. 18 - Prob. 12QPCh. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - Calculating the Cash Budget [LO3] Wildcat, Inc.,...Ch. 18 - Prob. 16QPCh. 18 - Costs of Borrowing [LO3] In exchange for a 400...Ch. 18 - Prob. 18QPCh. 18 - Prob. 1MCh. 18 - Prob. 2MCh. 18 - Prob. 3M
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- Concept Integration. Your appliance manufacturingcompany recently implemented a just-in-time inventory system (see Chapter 9) for all parts used in themanufacturing process. How might you expect thismove to affect the company’s inventory turnover rate,current ratio, and quick ratio?arrow_forwardQUESTION 9 Which of the following statements is NOT true of Economic Order Quantity? O A. The economic order quantity mathematically determines the minimum total inventory cost O B. The EOQ is directly proportional to the sales per period OC. The optìmal order size is determined by the EOQ model O D. The EOQ ignores inventory reorder costs and inventory carrying costsarrow_forwardQuestion 8 Which of the following is an advantage of the periodic invêntory system?| frequent physical inventory counts O cost prohibitive time consuming O real-time information for managersarrow_forward
- During a period of rising inventory costs and stable output prices, describe how net income and total assets would differ depending upon whether LIFO or FIFO is applied. Explain how your answer would change if the company is experiencing declining inventory costs and stable output prices.arrow_forwardInventory Costing When Inventory Quantities Are Small A number of companies have adopted a just-in-time procedure for acquiring inventory. These companies have arrangements with their suppliers that require the supplier to deliver inventory just as the company needs the goods. As a result, just-in-time companies keep very little inventory on hand. Required: Once a company has switched to the just-in-time procedure and has little inventory, should the inventory costing method (LIFO or FIFO) affect cost of goods sold?arrow_forwardWhich of the following is an advantage of the periodic inventory system? frequent physical inventory counts O cost prohibitive time consuming O real-time information for managersarrow_forward
- Which one of the following is a reason for the just-in-time inventory policy? Select one: O A. The manufacturer may want to ensure that production is uninterrupted. O B. It is possible that future supplies may become scarce. O C. The manufacturer wants to keep the investment in inventory to a minimum. D. The prices of the materials are expected to rise shortly. Clear my choicearrow_forwardWhich of the following is an advantage of the periodic inventory system? Group of answer choices frequent physical inventory counts cost prohibitive time consuming real-time information for managersarrow_forwardning Objective 2 S6-2 Determining inventory costing methods Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing method that averages cost changes. Requirements 1. Which inventory costing method would best meet Ward's goal? 2. Assume Ward wanted to expense out the newer purchases of goods instead. Which inventory costing method would best meet that need?arrow_forward
- Explain inventory turnover? Can this be too high everarrow_forwardWhich one of the following inventories may not be valued for balance sheet purposes at the inventory's selling price less distribution costs even if it is above the cost of the inventory? a. grain for an agricultural company b. crude oil for an oil company c. gold for a minnung corporation d. laptops for a computer manaufacturerarrow_forwardWhy are perpetual inventory systems more expensive to operate than periodic inventory systems? What conditions justify the additional cost of a perpetual inventory system?arrow_forward
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