Question 1

Marketable securities are purchased when excess cash is temporarily available and sold when cash is needed.

Accepted Answer

A) True 
 B)False

Question 2

Given that short-term interest rates typically fluctuate less than long-term rates,interest rate risk is least for

Accepted Answer

A)  treasury bills. 
B)  common stock. 
C)  long-term government bonds. 
D)  medium-term corporate bonds. 
A)  treasury bills. 
B)  common stock. 
C)  long-term government bonds. 
D)  medium-term corporate bonds.

Question 3

The most important reasons firms hold cash balances are the transaction and precautionary motives.

Accepted Answer

A) True 
 B)False

Question 4

A way of managing a firm's cash disbursements would be through

Accepted Answer

A)  zero balance accounts. 
B)  accounts receivable factoring. 
C)  lockbox system. 
D)  floating lien. 
A)  zero balance accounts. 
B)  accounts receivable factoring. 
C)  lockbox system. 
D)  floating lien.

Question 5

The initial step in any effective cash management program is cash flow forecasting.

Accepted Answer

A) True 
 B)False

Question 6

Credit and collection policies affect all of the following EXCEPT

Accepted Answer

A)  level of sales. 
B)  length of time before credit sales are collected. 
C)  terms of sales. 
D)  pricing policies. 
A)  level of sales. 
B)  length of time before credit sales are collected. 
C)  terms of sales. 
D)  pricing policies.

Question 7

The purpose of finished goods inventory is to uncouple the production and sales functions so that it is not necessary to produce the goods before a sale can occur.

Accepted Answer

A) True 
 B)False

Question 8

The industry in which a firm operates has relatively little effect on the relative amounts of transaction cash held.

Accepted Answer

A) True 
 B)False

Question 9

The interest earned on U.S.Treasury bills is subject to state and local income taxes.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following affects the precautionary motive for holding cash?

Accepted Answer

A)  the cash flow predictability 
B)  the firm's access to external funds 
C)  both A and B 
D)  none of the above 
A)  the cash flow predictability 
B)  the firm's access to external funds 
C)  both A and B 
D)  none of the above

Question 11

Lockbox arrangements may reduce mail float,processing float,and transit float.

Accepted Answer

A) True 
 B)False

Question 12

Describe the relationship between the firm's cash management program and the firm's risk of insolvency.

Accepted Answer

The term insolvency describes the situat

Question 13

Lockbox arrangement benefits include

Accepted Answer

A)  increased working capital from shorter receivables/cash transformation time. 
B)  elimination of bank charges for handling and audit functions. 
C)  increased cash flows from delays in uncollectible check processing. 
D)  all of the above are benefits from this arrangement. 
A)  increased working capital from shorter receivables/cash transformation time. 
B)  elimination of bank charges for handling and audit functions. 
C)  increased cash flows from delays in uncollectible check processing. 
D)  all of the above are benefits from this arrangement.

Question 14

Zero balance accounts permit centralized control over cash outflows while maintaining divisional disbursing authority.

Accepted Answer

A) True 
 B)False

Question 15

Current assets in order of liquidity are cash,marketable securities,inventory,and accounts receivable.

Accepted Answer

A) True 
 B)False

Question 16

A construction firm that accumulates cash in anticipation of a significant drop in lumber costs is an example of the ________ motive for holding cash.

Accepted Answer

A)  transaction 
B)  speculative 
C)  hedging 
D)  precautionary 
A)  transaction 
B)  speculative 
C)  hedging 
D)  precautionary

Question 17

A retailer sells most of its merchandise on credit and bills clients monthly.Which of the following elements of float does the retailer have the most control over?

Accepted Answer

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

Question 18

John Maynard Keynes segmented a firm's demand for cash into the following motives:

Accepted Answer

A)  risk, investment, and liquidity. 
B)  transaction, speculative and precautionary. 
C)  transaction, liquidity, and speculative. 
D)  transaction, speculative, and risky. 
A)  risk, investment, and liquidity. 
B)  transaction, speculative and precautionary. 
C)  transaction, liquidity, and speculative. 
D)  transaction, speculative, and risky.

Question 19

The purpose of carrying inventory is to

Accepted Answer

A)  make different production processes more dependent on sales. 
B)  make sales more independent of the production process. 
C)  have collateral for loans. 
D)  improve the current ratio. 
A)  make different production processes more dependent on sales. 
B)  make sales more independent of the production process. 
C)  have collateral for loans. 
D)  improve the current ratio.

Question 20

Which of the following factors determines the amount that a firm would have invested in accounts receivable?

Accepted Answer

A)  collection efforts 
B)  the percentage of credit sales to total sales 
C)  the volume of sales 
D)  the terms of sale 
E)  All of the above 
A)  collection efforts 
B)  the percentage of credit sales to total sales 
C)  the volume of sales 
D)  the terms of sale 
E)  All of the above

Marketable securities are purchased when excess cash is temporarily available and sold when cash is needed.

Given that short-term interest rates typically fluctuate less than long-term rates,interest rate risk is least for

The most important reasons firms hold cash balances are the transaction and precautionary motives.

A way of managing a firm's cash disbursements would be through

The initial step in any effective cash management program is cash flow forecasting.

Credit and collection policies affect all of the following EXCEPT

The purpose of finished goods inventory is to uncouple the production and sales functions so that it is not necessary to produce the goods before a sale can occur.

The industry in which a firm operates has relatively little effect on the relative amounts of transaction cash held.

The interest earned on U.S.Treasury bills is subject to state and local income taxes.

Which of the following affects the precautionary motive for holding cash?

Lockbox arrangements may reduce mail float,processing float,and transit float.

Describe the relationship between the firm's cash management program and the firm's risk of insolvency.

Lockbox arrangement benefits include

Zero balance accounts permit centralized control over cash outflows while maintaining divisional disbursing authority.

Current assets in order of liquidity are cash,marketable securities,inventory,and accounts receivable.

A construction firm that accumulates cash in anticipation of a significant drop in lumber costs is an example of the ________ motive for holding cash.

A retailer sells most of its merchandise on credit and bills clients monthly.Which of the following elements of float does the retailer have the most control over?

John Maynard Keynes segmented a firm's demand for cash into the following motives:

The purpose of carrying inventory is to

Which of the following factors determines the amount that a firm would have invested in accounts receivable?

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

Marketable securities are purchased when excess cash is temporarily available and sold when cash is needed.

Given that short-term interest rates typically fluctuate less than long-term rates,interest rate risk is least for

The most important reasons firms hold cash balances are the transaction and precautionary motives.

A way of managing a firm's cash disbursements would be through

The initial step in any effective cash management program is cash flow forecasting.

Credit and collection policies affect all of the following EXCEPT

The purpose of finished goods inventory is to uncouple the production and sales functions so that it is not necessary to produce the goods before a sale can occur.

The industry in which a firm operates has relatively little effect on the relative amounts of transaction cash held.

The interest earned on U.S.Treasury bills is subject to state and local income taxes.

Which of the following affects the precautionary motive for holding cash?

Lockbox arrangements may reduce mail float,processing float,and transit float.

Describe the relationship between the firm's cash management program and the firm's risk of insolvency.

Lockbox arrangement benefits include

Zero balance accounts permit centralized control over cash outflows while maintaining divisional disbursing authority.

Current assets in order of liquidity are cash,marketable securities,inventory,and accounts receivable.

A construction firm that accumulates cash in anticipation of a significant drop in lumber costs is an example of the ________ motive for holding cash.

A retailer sells most of its merchandise on credit and bills clients monthly.Which of the following elements of float does the retailer have the most control over?

John Maynard Keynes segmented a firm's demand for cash into the following motives:

The purpose of carrying inventory is to

Which of the following factors determines the amount that a firm would have invested in accounts receivable?

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