Exam 30: Working Capital Management

A municipal variable rate demand note (VRDN) I.is a long-term security; II.has interest payments linked to the level of short-term interest rates; III.may periodically be sold back to the issuer at face value; IV.is tax-exempt

In the United States, large-value electronic payments are made through

As an example of trade credit terms, "3/10, EOM, net 60" is not valid.

The market for short-term investments is known as the capital market.

Tom's Toys is currently experiencing a bad debt ratio of 6 percent. Tom is convinced that, with tighter credit controls, he can reduce this ratio to 2 percent; however, he expects sales to drop by 8 percent as a result. The cost of goods sold is 75 percent of the selling price. Per $100 of current sales, what is Tom's expected profit under the proposed credit standards?

Which of the following trade credit terms is not valid?

What are bankers' acceptances?

The discount on a 91-Treasury bill is 5.2 percent. What is the annually compounded rate of return? (Assume a 360-day discount basis.)

Negotiable CDs are issued by

If the short-term commercial paper rate is 10 percent and the corporate tax rate is 35 percent, what yield would a corporation require on an investment in auction-rate preferred stock? Assume the default risk is the same as for commercial paper.

Briefly explain the process of factoring accounts receivables.

If goods are sold on an open account, the customer is asked to sign an IOU.

Suppose you purchase goods on terms of 3/10, net 60. Taking compounding into account, what annual rate of interest is implied by the cash discount? (Assume a year has 365 days.)

In the United States, export credit insurance is provided by the Export-Import Bank in association with a group of insurance companies known as the Foreign Credit Insurance Association (FCIA).

The High-Rise Building Company (HRBC)uses 400,000 tons of stone per year. The carrying costs are $100/ton. The cost per order is $500. Calculate the optimal carrying costs. (Assume a linear usage rate and that HRBC runs its inventory down close to zero as the replenishment order arrives.)

Fedwire is a system that transfers money between banks.

Suppose you purchase goods on terms of 2/10, net 50. Taking compounding into account, what annual rate of interest is implied by the cash discount? (Assume a year has 365 days.)

In the economic order quantity (EOQ)inventory model, the optimal order size is achieved when

What is the main objective of a collection policy?

The net credit period for a company with terms of 3/10, net 60 is