21. What type of system allows a customer\'s bank to periodically transfer funds

Question

21. What type of system allows a customer's bank to periodically transfer funds from its account to a selling firm's bank account for payment of bills? a. Disbursement agreement b. Preauthorized debit system c. Lockbox agreement d. Concentration banking system e. Zero-balance account 22. The next year's net income of Byron Corporation is projected to be $21,000, and its payout ratio is 30 percent. Its target capital structure is 40 percent debt and 60 percent common equity What is the retained earnings break point? a. $35,000 b. $24,500 c. $6,300 d. $12,600 e. $8,400 23. Which of the following mathematical expressions is used to compute the degree of financial leverage at a particular level of earnings before interest and tax (EBIT)? Assume that the preferred stockholders receive no dividends. a. Earnings before interest and tax ÷ Earnings per share (EPS) b. Gross profit ÷ Earnings before interest and tax c. Sales +(Earnings before interest and tax - Interest) d. Earnings before interest and tax+ (Earnings before interest and tax Interest) e. (Earnings before interest and tax Interest Taxes) Number of shares 24. A report showing how long accounts receivable have been outstanding is called a. a time line b. a preauthorized debit system c. an aging schedule d. an account tracker e. a credit document

Explanation / Answer

21. b: Pre-authorized debit system

(Under this system, the customers bank directly settles the bills by transfering money to the seller's accounts)

22. b. $24500

Break even point of Retained earning = Addition to RE/ Equity proportion

21000*(1-0.3)/ 0.6

= $24500

23. d: EBIT/ (EBIT- Interest)

(DFL measures the sensitivity of a company’s earnings per share to fluctuations in its operating income)

24. c : ageing schedule

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