Question 1

The transaction motive refers to the need to hold cash:

Accepted Answer

A) as a safety margin. 
B) for unforeseen investment opportunities. 
C) for daily operations. 
D) as a financial reserve. 
E) for emergency situations. 
A) as a safety margin. 
B) for unforeseen investment opportunities. 
C) for daily operations. 
D) as a financial reserve. 
E) for emergency situations.

Question 2

Which one of the following will reduce the disbursement float of a firm?

Accepted Answer

A) Mailing a check from a very remote location 
B) Mailing an unsigned check so that it must be returned for a signature 
C) Paying a loan payment at the bank rather than mailing a check to the bank 
D) Requiring that all checks be held one day before mailing so they can be reviewed by a manager 
E) Writing checks on a zero-balance account rather than on the master account 
A) Mailing a check from a very remote location 
B) Mailing an unsigned check so that it must be returned for a signature 
C) Paying a loan payment at the bank rather than mailing a check to the bank 
D) Requiring that all checks be held one day before mailing so they can be reviewed by a manager 
E) Writing checks on a zero-balance account rather than on the master account

Question 3

During a normal month, Hank's receives a total of nine checks with a total value of $148,500.On average, it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Accepted Answer

A) $4,950 
B) $44,800 
C) $22,400 
D) $112,000 
E) $89,600 
A) $4,950 
B) $44,800 
C) $22,400 
D) $112,000 
E) $89,600

Question 4

Which of these are money market securities?
I.Jumbo CDs
II.Short-term municipal debt
III.U.S.Treasury bills
IV.Commercial paper

Accepted Answer

A) I and IV only 
B) II and III only 
C) I, II, and IV only 
D) II, III, and IV only 
E) I, II, III, and IV 
A) I and IV only 
B) II and III only 
C) I, II, and IV only 
D) II, III, and IV only 
E) I, II, III, and IV

Question 5

The Flowering Vine buys hanging plants for $4 each and resells them for $10.95 each.The firm sells 6,200 plants per year.Generally, the firm orders 250 plants at a time and has a fixed cost per order of $49.The carrying cost per unit is $22.32.To avoid newer plants mixing with older plants, the inventory is totally sold out before it is restocked.Given the current ordering system, the total annual carrying cost is ____ and the total annual restocking cost is ____.

Accepted Answer

A) $2,811; $1,215 
B) $2,811; $1,269 
C) $2,790; $1,215 
D) $2,790; $1,225 
E) $3,212; $1,269 
A) $2,811; $1,215 
B) $2,811; $1,269 
C) $2,790; $1,215 
D) $2,790; $1,225 
E) $3,212; $1,269

Question 6

The Check Clearing Act for the 21st Century has caused:

Accepted Answer

A) increased check kiting. 
B) zero-balance accounts to disappear. 
C) the elimination of all lockboxes. 
D) a reduction in collection float, but not disbursement float. 
E) a reduction in both collection and disbursement float. 
A) increased check kiting. 
B) zero-balance accounts to disappear. 
C) the elimination of all lockboxes. 
D) a reduction in collection float, but not disbursement float. 
E) a reduction in both collection and disbursement float.

Question 7

On any given day, a firm receives and deposits numerous checks worth an average combined total of $9,215.The funds from the deposited checks are generally available after two days.Every day, the firm mails out checks totaling $7,300 that generally take three days to clear the bank.What is the amount of the collection float if the opening bank balance was $9,200?

Accepted Answer

A) $14,230 
B) $15,970 
C) $18,430 
D) $7,300 
E) $11,130 
A) $14,230 
B) $15,970 
C) $18,430 
D) $7,300 
E) $11,130

Question 8

As of Monday morning, the ledger balance and the available balance for a firm was $3,000.During the day, the firm wrote three checks in the amounts of $750, $225, and $452.The firm deposited a check for $560 and a check for $258.What is the amount of the collection float as of the end of the day assuming none of these checks have cleared?

Accepted Answer

A) $723 
B) $2.431 
C) $609 
D) $854 
E) $1,269 
A) $723 
B) $2.431 
C) $609 
D) $854 
E) $1,269

Question 9

Which characteristic generally applies to commercial paper?

Accepted Answer

A) Issued only by financial institutions 
B) Issued only by corporations 
C) Maturities limited to 90 days or less 
D) Unsecured 
E) Secured by accounts receivable 
A) Issued only by financial institutions 
B) Issued only by corporations 
C) Maturities limited to 90 days or less 
D) Unsecured 
E) Secured by accounts receivable

Question 10

The primary purpose of a cash discount is to:

Accepted Answer

A) compensate customers for an out-of-stock item. 
B) compensate customers for faulty goods or services. 
C) offset the interest charges on an account receivable. 
D) induce customers to pay promptly. 
E) induce customers to purchase specialty items. 
A) compensate customers for an out-of-stock item. 
B) compensate customers for faulty goods or services. 
C) offset the interest charges on an account receivable. 
D) induce customers to pay promptly. 
E) induce customers to purchase specialty items.

Question 11

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

Accepted Answer

A) terms of sale. 
B) receivables factors. 
C) five Cs of credit. 
D) collection policy determinants. 
E) credit scores. 
A) terms of sale. 
B) receivables factors. 
C) five Cs of credit. 
D) collection policy determinants. 
E) credit scores.

Question 12

The process of determining the probability that potential customers will not pay is called:

Accepted Answer

A) credit analysis. 
B) collection policy. 
C) account aging. 
D) credit terms. 
E) customer invoicing. 
A) credit analysis. 
B) collection policy. 
C) account aging. 
D) credit terms. 
E) customer invoicing.

Question 13

As of this morning, a firm had a ledger balance of $1,252 with no outstanding deposits or checks.Today, the firm deposited three checks in the amount of $63 each and wrote a check in the amount of $235.What is the amount of the collection float as of the end of the day assuming none of these checks had cleared?

Accepted Answer

A) $46 
B) $828 
C) $424 
D) $189 
E) $1,070 
A) $46 
B) $828 
C) $424 
D) $189 
E) $1,070

Question 14

On May 12, you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10, net 20.The discounted amount due is _____ which is payable no later than ____.May has 31 days.

Accepted Answer

A) $2,960; June 1 
B) $3,515; June 1 
C) $5,580; May 22 
D) $6,076; May 22 
E) $5,960; May 22 
A) $2,960; June 1 
B) $3,515; June 1 
C) $5,580; May 22 
D) $6,076; May 22 
E) $5,960; May 22

Question 15

Which of these is most likely the fastest method of collecting cash?

Accepted Answer

A) Requiring customers to submit all payments to a lockbox 
B) Requiring customers to submit all payments to the home office 
C) Initiating a financial electronic data interchange at the time of sale 
D) Offering customers credit terms of 1/5, net 15 
E) Eliminating all disbursement float 
A) Requiring customers to submit all payments to a lockbox 
B) Requiring customers to submit all payments to the home office 
C) Initiating a financial electronic data interchange at the time of sale 
D) Offering customers credit terms of 1/5, net 15 
E) Eliminating all disbursement float

Question 16

Harvest Foods generally receives three checks a month in the amounts of $38,950, $16,750, and $63,800.It takes an average of one day for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float? Assume a 30-day month.

Accepted Answer

A) $4,333.33 
B) $3,983.33 
C) $4,209.33 
D) $3,506.00 
E) $4,020.00 
A) $4,333.33 
B) $3,983.33 
C) $4,209.33 
D) $3,506.00 
E) $4,020.00

Question 17

Which one of the following best illustrates the concept of derived demand?

Accepted Answer

A) A minimum wage worker tends to buy more off-brand products than do more highly paid professionals. 
B) A windshield company has to step up production because auto sales are increasing. 
C) A grocery store is selling more fresh fruits and vegetables. 
D) Restaurant sales are rising because unemployment is falling. 
E) Retail stores have increased sales around the holiday season. 
A) A minimum wage worker tends to buy more off-brand products than do more highly paid professionals. 
B) A windshield company has to step up production because auto sales are increasing. 
C) A grocery store is selling more fresh fruits and vegetables. 
D) Restaurant sales are rising because unemployment is falling. 
E) Retail stores have increased sales around the holiday season.

Question 18

The primary goal of inventory management is to minimize the:

Accepted Answer

A) number of orders per year. 
B) average inventory level. 
C) total costs of holding inventory. 
D) level of inventory for the most expensive items. 
E) total opportunity costs. 
A) number of orders per year. 
B) average inventory level. 
C) total costs of holding inventory. 
D) level of inventory for the most expensive items. 
E) total opportunity costs.

Question 19

Larry Imports writes three checks a day for an average amount of $11,500 each.These checks generally clear the bank 2.1 days after they are written.In addition, the firm generally receives and deposits checks amounting to $19,500 each day.All deposits are available the next day.What is the firm's net float?

Accepted Answer

A) Net collection float of $19,500 
B) Net collection float of $52,950 
C) Net collection float of $91,950 
D) Net disbursement float of $52,950 
E) Net disbursement float of $91,950 
A) Net collection float of $19,500 
B) Net collection float of $52,950 
C) Net collection float of $91,950 
D) Net disbursement float of $52,950 
E) Net disbursement float of $91,950

Question 20

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

Accepted Answer

A) Aging schedule 
B) Collection report 
C) Credit evaluation report 
D) Invoice schedule 
E) Terms of credit 
A) Aging schedule 
B) Collection report 
C) Credit evaluation report 
D) Invoice schedule 
E) Terms of credit

The transaction motive refers to the need to hold cash:

Which one of the following will reduce the disbursement float of a firm?

During a normal month, Hank's receives a total of nine checks with a total value of $148,500.On average, it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Which of these are money market securities? I.Jumbo CDs II.Short-term municipal debt III.U.S.Treasury bills IV.Commercial paper

The Check Clearing Act for the 21^st Century has caused:

Which characteristic generally applies to commercial paper?

The primary purpose of a cash discount is to:

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

The process of determining the probability that potential customers will not pay is called:

On May 12, you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10, net 20.The discounted amount due is _ which is payable no later than .May has 31 days.

Which of these is most likely the fastest method of collecting cash?

Which one of the following best illustrates the concept of derived demand?

The primary goal of inventory management is to minimize the:

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

International Aspects of Financial Management

Filters

Exam 17: Working Capital Management

The transaction motive refers to the need to hold cash:

Which one of the following will reduce the disbursement float of a firm?

During a normal month, Hank's receives a total of nine checks with a total value of $148,500.On average, it takes 1 day from the date of deposit for the funds from these checks to be available to the firm.Assume each month has 30 days.What is the average daily float?

Which of these are money market securities? I.Jumbo CDs II.Short-term municipal debt III.U.S.Treasury bills IV.Commercial paper

The Check Clearing Act for the 21st Century has caused:

Which characteristic generally applies to commercial paper?

The primary purpose of a cash discount is to:

The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:

The process of determining the probability that potential customers will not pay is called:

On May 12, you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10, net 20.The discounted amount due is _____ which is payable no later than ____.May has 31 days.

Which of these is most likely the fastest method of collecting cash?

Which one of the following best illustrates the concept of derived demand?

The primary goal of inventory management is to minimize the:

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding.What is the name given to this listing?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

International Aspects of Financial Management

Filters

The Check Clearing Act for the 21^st Century has caused:

On May 12, you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10, net 20.The discounted amount due is _ which is payable no later than .May has 31 days.