Question 1

Working capital does not include:

Accepted Answer

A)  cash 
B)  accounts receivable 
C)  marketable securities 
D)  property, plant, and equipment 
A)  cash 
B)  accounts receivable 
C)  marketable securities 
D)  property, plant, and equipment

Question 2

Marketable securities may be held for speculative motives.

Accepted Answer

A) True 
 B)False

Question 3

Cutting working capital can increase company earnings.

Accepted Answer

A) True 
 B)False

Question 4

Methods used to speed up collections include all of the following except:

Accepted Answer

A)  a lockbox system 
B)  remote disbursement locations 
C)  pre-authorized checks 
D)  inventory flooring arrangements 
A)  a lockbox system 
B)  remote disbursement locations 
C)  pre-authorized checks 
D)  inventory flooring arrangements

Question 5

Activities that decrease the cash conversion cycle will increase the firm's need to obtain financing.

Accepted Answer

A) True 
 B)False

Question 6

With regards to credit analysis, this is best judged by reviewing past credit history for long overdue or unpaid obligations.

Accepted Answer

A)  Character 
B)  Capacity 
C)  Capital 
D)  Collateral 
A)  Character 
B)  Capacity 
C)  Capital 
D)  Collateral

Question 7

The transactions motive is the demand for holding cash.

Accepted Answer

A) True 
 B)False

Question 8

The same as delivery float.

Accepted Answer

A)  Float 
B)  Transmission float 
C)  Processing float 
D)  Clearing float 
A)  Float 
B)  Transmission float 
C)  Processing float 
D)  Clearing float

Question 9

Most firms need similar sized cash buffers.

Accepted Answer

A) True 
 B)False

Question 10

The delay in transferring the means of payment from the payer (customer) to the payee (the provider of the goods or services).

Accepted Answer

A)  Float 
B)  Transmission float 
C)  Processing float 
D)  Clearing float 
A)  Float 
B)  Transmission float 
C)  Processing float 
D)  Clearing float

Question 11

A firm with an inventory period of 30 days, an accounts receivable period of 30 days, and an accounts payable period of 90 days has a cash conversion cycle of _____ days.

Accepted Answer

A)  150 
B)  -60 
C)  30 
D)  -30 
A)  150 
B)  -60 
C)  30 
D)  -30

Question 12

One type of investment that would not be suitable for marketable securities would be:

Accepted Answer

A)  bankers' acceptances 
B)  short-term notes of U.S. government agencies 
C)  negotiable CD's 
D)  mortgages 
A)  bankers' acceptances 
B)  short-term notes of U.S. government agencies 
C)  negotiable CD's 
D)  mortgages

Question 13

One way a firm can reduce the amount of cash it needs in any one month is to

Accepted Answer

A)  slow down the payment of receivables 
B)  delay the payment of wages 
C)  speed up the payment of taxes 
D)  speed up the payment of wages 
A)  slow down the payment of receivables 
B)  delay the payment of wages 
C)  speed up the payment of taxes 
D)  speed up the payment of wages

Question 14

The disbursement float is the delay in transferring the means of payment from the payer (customer) to the payee (the provider of goods or services).

Accepted Answer

A) True 
 B)False

Question 15

The delivery or transmission float is the delay in transferring the means of payment from the payer (customer) to the payee (the provider of goods or services).

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is false?

Accepted Answer

A)  The cash conversion cycle is the time between when the firm pays its suppliers and when it collects money from its customers. 
B)  Because commercial paper rates are typically below the U.S. Treasury bill rates, commercial paper is a valuable short-term financing source for high quality business firms. 
C)  More efficient management of working capital assets will lessen the firm's need to obtain financing. 
D)  Commercial paper is a form of unsecured short term borrowing. 
A)  The cash conversion cycle is the time between when the firm pays its suppliers and when it collects money from its customers. 
B)  Because commercial paper rates are typically below the U.S. Treasury bill rates, commercial paper is a valuable short-term financing source for high quality business firms. 
C)  More efficient management of working capital assets will lessen the firm's need to obtain financing. 
D)  Commercial paper is a form of unsecured short term borrowing.

Question 17

Average payment period is calculated as Accounts payable divided by COGS per day.

Accepted Answer

A) True 
 B)False

Question 18

A firm has a minimum desired cash balance of $120,000. Any cash shortfalls will be made up with short-term financing. The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

Accepted Answer

A)  -$120,000 
B)  $25,000 
C)  $215,000 
D)  $200,000 
A)  -$120,000 
B)  $25,000 
C)  $215,000 
D)  $200,000

Question 19

Which of the following is not considered to be one of the five C's of credit analysis?

Accepted Answer

A)  character 
B)  caution 
C)  capital 
D)  collateral 
A)  character 
B)  caution 
C)  capital 
D)  collateral

Question 20

Federal funds are an excellent investment alternative for a firm's excess cash.

Accepted Answer

A) True 
 B)False

Working capital does not include:

Marketable securities may be held for speculative motives.

Cutting working capital can increase company earnings.

Methods used to speed up collections include all of the following except:

Activities that decrease the cash conversion cycle will increase the firm's need to obtain financing.

With regards to credit analysis, this is best judged by reviewing past credit history for long overdue or unpaid obligations.

The transactions motive is the demand for holding cash.

The same as delivery float.

Most firms need similar sized cash buffers.

The delay in transferring the means of payment from the payer (customer) to the payee (the provider of the goods or services).

A firm with an inventory period of 30 days, an accounts receivable period of 30 days, and an accounts payable period of 90 days has a cash conversion cycle of _____ days.

One type of investment that would not be suitable for marketable securities would be:

One way a firm can reduce the amount of cash it needs in any one month is to

The disbursement float is the delay in transferring the means of payment from the payer (customer) to the payee (the provider of goods or services).

The delivery or transmission float is the delay in transferring the means of payment from the payer (customer) to the payee (the provider of goods or services).

Which of the following statements is false?

Average payment period is calculated as Accounts payable divided by COGS per day.

A firm has a minimum desired cash balance of $120,000. Any cash shortfalls will be made up with short-term financing. The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

Which of the following is not considered to be one of the five C's of credit analysis?

Federal funds are an excellent investment alternative for a firm's excess cash.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 15: Managing Working Capital

Working capital does not include:

Marketable securities may be held for speculative motives.

Cutting working capital can increase company earnings.

Methods used to speed up collections include all of the following except:

Activities that decrease the cash conversion cycle will increase the firm's need to obtain financing.

With regards to credit analysis, this is best judged by reviewing past credit history for long overdue or unpaid obligations.

The transactions motive is the demand for holding cash.

The same as delivery float.

Most firms need similar sized cash buffers.

The delay in transferring the means of payment from the payer (customer) to the payee (the provider of the goods or services).

A firm with an inventory period of 30 days, an accounts receivable period of 30 days, and an accounts payable period of 90 days has a cash conversion cycle of _____ days.

One type of investment that would not be suitable for marketable securities would be:

One way a firm can reduce the amount of cash it needs in any one month is to

The disbursement float is the delay in transferring the means of payment from the payer (customer) to the payee (the provider of goods or services).

The delivery or transmission float is the delay in transferring the means of payment from the payer (customer) to the payee (the provider of goods or services).

Which of the following statements is false?

Average payment period is calculated as Accounts payable divided by COGS per day.

A firm has a minimum desired cash balance of $120,000. Any cash shortfalls will be made up with short-term financing. The net cash flow for January is $80,000 and the beginning balance for that month is $15,000: short-term financing requirements that month will be:

Which of the following is not considered to be one of the five C's of credit analysis?

Federal funds are an excellent investment alternative for a firm's excess cash.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters