CMA (Certified Management Accountant) - Part II SU7 questions with correct answers

Basis Piont Correct Answer-This discount rate description is one-hundredth of 1%. EXAMPLE: 300 basis points equals 3% Sources of Short-Term Financing (3) Correct Answer-1. Market-based instruments 2. Spontaneous sources: those that arise in the normal course of business, such as accounts payable. 3. Commercial Banks Trade Credit Terms - Example Correct Answer-2/10 net 30. The firm will receive a 2% discount if the entire balance is paid within 10 days and that the entire balance, whether or not the discount is taken, is due within 30 days. Usable Funds Correct Answer-= Invoice Amount x (1.0 - Discount %) 2/10 net 30 Annualized Cost of not taking a discount Correct Answer-[Discount % / (100% - Discount %)] x [Days in Year / (Total Payment period - Discount Period)] Provides a cost of funds % Disadvantages of Short-Term Bank L