Quiz Ch 20 – T/F Cost-Driven Inventory Optimization
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: Lower optimal inventory levels correlate with higher carrying costs and lower restocking expenses.
True or false: Lower optimal inventory levels correlate with higher carrying costs and lower restocking expenses.
True or false: Conducting a comprehensive credit analysis for all customers is cost-effective due to the potential high costs associated with defaults.
True or false: Obtaining credit information on publicly traded companies through bond ratings can be an expensive process.
True or false: Offering credit hinges on the probability of payment. It is recommended to extend credit when the expected profit surpasses that of refusing.
True or false: In the absence of the chance for repeat orders, extending credit for the sale is recommended when the default probability is lower than the profit margin.
True or false: Firms are more inclined to extend credit when there is a greater chance that a potential customer will become a repeat client.
True or false: When a firm makes purchases on credit, it is essentially taking a loan from its supplier.
True or false: Electronic transfer methods such as CHIPS or Fedwire are commonly utilized for substantial business payments.
True or false: The ratio of inventory to daily cost of goods sold can be used to estimate a firm’s inventory period.
True or false: The incremental costs should be carefully considered against the potential benefits of additional credit analysis.