Question 1

A firm's credit and collection policies usually include

Accepted Answer

A)  terms of sale, quality of customers, and collection of credit sales. 
B)  average collection period, dollar value of aged receivables, and terms of sale. 
C)  terms of sale and collection of credit sales. 
D)  terms of sale, level of credit sales, and collection of credit sales. 
A)  terms of sale, quality of customers, and collection of credit sales. 
B)  average collection period, dollar value of aged receivables, and terms of sale. 
C)  terms of sale and collection of credit sales. 
D)  terms of sale, level of credit sales, and collection of credit sales.

Question 2

The time necessary for a deposited check to clear through the commercial banking system causes which of the following types of floats?

Accepted Answer

A)  mail 
B)  processing 
C)  transit 
D)  disbursing 
A)  mail 
B)  processing 
C)  transit 
D)  disbursing

Question 3

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

Accepted Answer

A) True 
 B)False

Question 4

If a firm with credit terms of 2/10 net 30 were to change its terms to 2/10 net 60,the result would probably be

Accepted Answer

A)  more customers would take advantage of the cash discount. 
B)  fewer customers would take advantage of the cash discount. 
C)  increased accounts receivable turnover. 
D)  a reduction in safety stock. 
A)  more customers would take advantage of the cash discount. 
B)  fewer customers would take advantage of the cash discount. 
C)  increased accounts receivable turnover. 
D)  a reduction in safety stock.

Question 5

You have a choice between investing in a corporate bond or a municipal bond.The corporate bond has an annual yield of 10 percent,while the municipal bond has an annual yield of 7 percent.At what tax rate would you be indifferent between buying the corporate bond or the municipal bond?

Accepted Answer

Before-tax equivalent yield on

Question 6

The speed of the collections process is determined by three types of float: mail float,processing float,and transit float.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT a category of inventory?

Accepted Answer

A)  raw materials 
B)  work-in-process 
C)  purchases 
D)  finished goods 
A)  raw materials 
B)  work-in-process 
C)  purchases 
D)  finished goods

Question 8

Yields on various financial instruments tend to be positively correlated with maturity.

Accepted Answer

A) True 
 B)False

Question 9

As inflation pushes interest rates up,the cost of carrying inventory rises.

Accepted Answer

A) True 
 B)False

Question 10

One advantage of zero balance accounts is an increase in disbursing float.

Accepted Answer

A) True 
 B)False

Question 11

Generally,the least important motive for holding liquid assets for a typical company is the speculative motive.

Accepted Answer

A) True 
 B)False

Question 12

Marketable securities are near-cash assets because they can be converted into cash quickly.

Accepted Answer

A) True 
 B)False

Question 13

The financial manager typically cannot control the level of credit sales,and hence the company's investment in accounts receivable,as the level of credit sales is determined in large part by the nature of the business enterprise.

Accepted Answer

A) True 
 B)False

Question 14

In the EOQ model,the carrying cost on inventory should include the required rate of an investment in inventory.

Accepted Answer

A) True 
 B)False

Question 15

A company that has an unpredictable cash flow,and is holding cash because of things that might happen due to this uncertainty,is holding a larger minimum cash balance due to which type of motive?

Accepted Answer

A)  transaction 
B)  precautionary 
C)  speculative 
D)  common sense 
A)  transaction 
B)  precautionary 
C)  speculative 
D)  common sense

Question 16

Cash inflows come from

Accepted Answer

A)  purchase of marketable securities. 
B)  purchase of fixed assets. 
C)  credit sales. 
D)  cash sales. 
A)  purchase of marketable securities. 
B)  purchase of fixed assets. 
C)  credit sales. 
D)  cash sales.

Question 17

Of the following EOQ model assumptions,the most limiting is

Accepted Answer

A)  uniform demand. 
B)  constant unit price. 
C)  constant ordering costs. 
D)  independent orders. 
A)  uniform demand. 
B)  constant unit price. 
C)  constant ordering costs. 
D)  independent orders.

Question 18

The objectives of a zero balance account system for the firm include

Accepted Answer

A)  reduce disbursing float. 
B)  achieve better control over its cash payments. 
C)  increase cash balances in regional rather than national banks. 
D)  All of the above are correct. 
A)  reduce disbursing float. 
B)  achieve better control over its cash payments. 
C)  increase cash balances in regional rather than national banks. 
D)  All of the above are correct.

Question 19

Brett's,Inc.has received a proposal from its bank to establish a lock-box system to accelerate the receipt of $600 million annually on 900,000 checks.By its own analysis,Brett's,Inc.believes such a system would decrease total float by 3.5 days.If Brett's,Inc.can earn 7 percent before taxes on the released funds,what is the maximum that Brett's,Inc.should be willing to pay the bank per check for the service? Use a 365-day year.

Accepted Answer

P = (3.5)

Question 20

Which of the following would be an example of the "speculative motive" for a firm holding cash balances?

Accepted Answer

A)  make dividend payments 
B)  anticipating a strike 
C)  purchase of inventory 
D)  take advantage of an anticipated decline in the price of raw materials 
A)  make dividend payments 
B)  anticipating a strike 
C)  purchase of inventory 
D)  take advantage of an anticipated decline in the price of raw materials

A firm's credit and collection policies usually include

The time necessary for a deposited check to clear through the commercial banking system causes which of the following types of floats?

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

If a firm with credit terms of 2/10 net 30 were to change its terms to 2/10 net 60,the result would probably be

You have a choice between investing in a corporate bond or a municipal bond.The corporate bond has an annual yield of 10 percent,while the municipal bond has an annual yield of 7 percent.At what tax rate would you be indifferent between buying the corporate bond or the municipal bond?

The speed of the collections process is determined by three types of float: mail float,processing float,and transit float.

Which of the following is NOT a category of inventory?

Yields on various financial instruments tend to be positively correlated with maturity.

As inflation pushes interest rates up,the cost of carrying inventory rises.

One advantage of zero balance accounts is an increase in disbursing float.

Generally,the least important motive for holding liquid assets for a typical company is the speculative motive.

Marketable securities are near-cash assets because they can be converted into cash quickly.

The financial manager typically cannot control the level of credit sales,and hence the company's investment in accounts receivable,as the level of credit sales is determined in large part by the nature of the business enterprise.

In the EOQ model,the carrying cost on inventory should include the required rate of an investment in inventory.

A company that has an unpredictable cash flow,and is holding cash because of things that might happen due to this uncertainty,is holding a larger minimum cash balance due to which type of motive?

Cash inflows come from

Of the following EOQ model assumptions,the most limiting is

The objectives of a zero balance account system for the firm include

Which of the following would be an example of the "speculative motive" for a firm holding cash balances?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Filters

Exam 17: Cash,receivables,and Inventory Management

A firm's credit and collection policies usually include

The time necessary for a deposited check to clear through the commercial banking system causes which of the following types of floats?

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

If a firm with credit terms of 2/10 net 30 were to change its terms to 2/10 net 60,the result would probably be

You have a choice between investing in a corporate bond or a municipal bond.The corporate bond has an annual yield of 10 percent,while the municipal bond has an annual yield of 7 percent.At what tax rate would you be indifferent between buying the corporate bond or the municipal bond?

The speed of the collections process is determined by three types of float: mail float,processing float,and transit float.

Which of the following is NOT a category of inventory?

Yields on various financial instruments tend to be positively correlated with maturity.

As inflation pushes interest rates up,the cost of carrying inventory rises.

One advantage of zero balance accounts is an increase in disbursing float.

Generally,the least important motive for holding liquid assets for a typical company is the speculative motive.

Marketable securities are near-cash assets because they can be converted into cash quickly.

The financial manager typically cannot control the level of credit sales,and hence the company's investment in accounts receivable,as the level of credit sales is determined in large part by the nature of the business enterprise.

In the EOQ model,the carrying cost on inventory should include the required rate of an investment in inventory.

A company that has an unpredictable cash flow,and is holding cash because of things that might happen due to this uncertainty,is holding a larger minimum cash balance due to which type of motive?

Cash inflows come from

Of the following EOQ model assumptions,the most limiting is

The objectives of a zero balance account system for the firm include

Which of the following would be an example of the "speculative motive" for a firm holding cash balances?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Filters